London, March 26th (Argus) - The escalation of the conflict in the Middle East and the disruption of shipping in the Strait of Hormuz have so far had a limited direct impact on the fundamentals of the global copper market. The current market reaction is mainly based on macroeconomic concerns rather than actual supply disruptions. Market participants are continuously assessing the impact of the conflict on the flow of sulfur and sulfuric acid, especially considering their importance for solvent extraction-electrolysis (SX-EW) copper production in parts of Africa. However, industry feedback indicates that the risks to global copper supply may be more manageable than initially feared. "In this context, the copper market is currently not a true supply-side story - it is more of a top-down macro story," a market participant said. Since the conflict began, the LME copper price has shown a downward trend. This is mainly due to market concerns that rising energy prices will push up inflation, delay interest rate cuts, and suppress industrial demand. As of Thursday, the LME benchmark copper price has fallen by 8.3% this month to $12,189.50 per ton. However, compared to precious metals such as gold and silver (with a decline of approximately 15-17%), this copper price correction is relatively mild. Some participants pointed out that, given the current geopolitical backdrop, the market reaction has not been as intense as expected.
"Some believe that compared to the energy price fluctuations we have seen, the reaction in the copper market is relatively mild," an European copper trader said. The sulfur supply risk is mainly concentrated in the supply end of SX-EW copper production in Africa. The main concern is about the acquisition of sulfur, which is a key raw material for producing sulfuric acid, and sulfuric acid is crucial for the operation of SX-EW copper mines in countries like the Democratic Republic of Congo. The disruption of sulfur transportation through the Strait of Hormuz has raised concerns about potential tightening of sulfuric acid supply and its impact on copper mining production using the acid leaching process. However, this impact is not evenly distributed within the copper industry. The Democratic Republic of Congo is the region with the highest risk exposure, as a significant proportion of its copper production relies on the acid leaching method. In contrast, other major producing countries such as Zambia are less affected, as they rely more on the smelting of copper concentrates rather than the SX-EW process.
