The country of Chile, located in South America, was rocked by one of the largest earthquakes ever recorded on February 27, 2010. The 8.8 magnitude earthquake had a devastating effect on the country and could mean another sharp increase in copper over the coming months.
Chile is one of the largest producers of copper. Estimates have it producing over 1/3 of the world’s supply each year. The earthquake shut down power to most copper mines over the weekend creating an immediate spike in copper prices when the commodity markets opened on Monday March 1st.
“It is hard to say how much copper will increase due to a natural disaster of this size,” commented Bryce Huett Owner of Distributor Wire & Cable in Denver, CO. “Luckily, many of the largest copper mines were located in the northern area of the country away from the epicenter of the quake allowing them to re-open already. I would expect a price spike due to the interruption in power over the weekend but things to settle back down quickly as it is restored.”
The good news is there appears to be no damage to key mines and inventory levels are at a 6 year high meaning copper prices should remain stable for the time being. Over the past year, copper prices have more than doubled and could potentially reach $4.00/lb in 2010 according to some experts. While supply has briefly been affected by the earthquake, the main driver continues to be the demand from China and its rapidly growing economy.