From TD this morningEvent On December 8, Anglo American plc (not covered) revised its multi-year production guidance, including a material reduction of copper production in 2024 and 2025 (Exhibit 1). Impact: POSITIVE for copper prices
Anglo American, the world's eighth largest copper producer, has reduced the midpoint of its copper production guidance by 195kt (~20%) in 2024 to a range of 730kt-790kt and cut a further 165kt in 2025 (-19% vs. previous estimates) in 2025 to 690kt-750kt. The company noted that production guidance was impacted by lower grades and ore hardness at Los Bronces, along with a revised mine plan at El Soldado. In 2025, the company highlighted that grades are expected to decline across all its operations in Chile, while production in Peru will be impacted by a revised mine plan to address geotechnical issues.
Anglo American's production cuts in 2024 represent approximately 0.7% of forecast global refined production (27.0Mt), according to Wood Mackenzie's estimates (Exhibit 2).
An estimated 2% of 2024 global production cut in the last two weeks — Anglo American's revised estimates follow First Quantum's announcement on November 29 that it has declared force majeure at Cobre Panama and laid off the bulk of its mine workforce in response to the ongoing situation in Panama (see note). We have assumed that operations at Cobre Panama will restart in Q4/24, which has reduced our 2024 copper forecast by 387kt (100% basis). The reductions at Anglo-American, combined with our estimated reductions at Cobre Panama, represent approximately 2% of 2024 global production.
Copper markets could shift to deficits in 2024 — Prior to the recent production cuts, Wood Mackenzie was forecasting a copper market surplus of 241kt in 2024 based on supply growth of 5.1% next year and 3.8% consumption growth (Exhibit 2). Copper markets could now shift back into deficits in both 2024 and 2025, which should benefit copper producers. S
hare prices of copper producers under our research coverage universe were up between 3-6% last Friday (excluding First Quantum). Exhibit 3 presents an EBITDA sensitivity to copper prices for our producer coverage universe.