Grasberg disaster exposes copper market fragilities

The copper market is long accustomed to unexpected supply hits but the catastrophic events at Freeport-McMoRan’s Grasberg mine in Indonesia are unprecedented in terms of scale and potential impact.

- Andy Home

Trucks operating in the open-pit mine of PT Freeport's Grasberg copper and gold mine complex near Timika, in the eastern region of Papua, Indonesia. REUTERS

Grasberg is the world’s second-largest copper mine after Escondida in Chile. Last year’s production of 815,000 metric tonnes represented 4% of global output.

What happened on the night of Sept 8 in the Block Cave part of the mine was the stuff of nightmares. A colossal 800,000-tonne mud rush erupted into the mine, travelling rapidly to multiple sections and blocking access routes.

Two workers were killed. All mining activity has been suspended while the company works to locate another five missing personnel.

Freeport's best guess is that Grasberg may return to pre-accident operating rates in 2027.

It’s a big hit to an already stretched supply chain, which is why the London Metal Exchange copper price jumped to a 15-month high of US$10,485 (339,170 baht) per tonne when Freeport declared force majeure last week.

Freeport expects that other unaffected parts of Grasberg could restart operations around the middle of the fourth quarter. A ramp-up of the Block Cave mine itself could begin in the first half of next year.

Copper production will be “insignificant” in the fourth quarter and sales guidance next year has been cut by 35%.