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COVID-19 has generated the most severe demand shock for industrial metals since the financial crisis a decade ago.

The first-round impact came from the lockdown of key demand sectors such as automotive. The second-round hit, which is still playing out, comes from slumping corporate and household confidence as the economic fall-out from the fatal coronavirus travels around the globe.

But COVID-19 has also affected metals supply in the form of mine and smelter closures due to national quarantine measures.

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The impact is not uniform but rather reflects each metal’s unique supply profile.

Aluminum production, for example, has been left largely unscathed, with most governments, except Argentina, designating smelters as critical industries that could continue operating.

Tin and zinc, by contrast, have seen significant disruption, partly because of a particularly hard lockdown in Peru, a major producer of both metals.

This game of lockdown lottery isn’t over either.

The focus right now is turning to copper and Chile, the world’s largest producer of the red metal, where the coronavirus appears to be still spreading through the production sector.


COVID-19 lockdowns at one stage knocked out three of the world’s five largest tin producers outside of China.

Peru’s Minsur, Bolivia’s EM Vinto and Malaysia Smelting Corp. accounted for a cumulative 55,400 tonnes of production last year, representing 17% of global output.

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All three are vertically integrated producers, meaning both mines and smelters were curtailed, directly affecting the availability of refined tin.

This has translated into tin being the out-performer of the base metals traded on the London Metal Exchange. (LME)

Currently trading at $16,800 per tonne, LME three-month tin is now down only 2% since the start of the year.

It helps that tin supply was already stressed.

China, the world’s largest producer, has been struggling with a shortage of domestic raw material and disruption to the flow of concentrate from Myanmar, the country’s largest supplier.

China flipped to being a net importer of refined tin in September last year and it has remained so ever since. Cumulative net imports totalled 2,600 tonnes in the first four months of 2020. Last year, by contrast, it was a net exporter of 3,600 tonnes over the same period.

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With Indonesia’s PT Timah also slashing its 2020 sales target to 55,000 tonnes, it’s evident that COVID-19 has significantly exacerbated existing supply pressures.


Measured by mine production, zinc has been hardest hit by lockdowns, particularly that in Peru, a major supplier of concentrates to the world’s smelters.

Analysts at Macquarie Bank estimate over 500,000 tonnes of lost production, representing more than 4% of global supply. (“COVID-19 base metal supply cuts - June Update,” June 24, 2020)

JP Morgan analysts have a higher assessment of 790,000 tonnes after factoring in price-related closures.

The latter is a reminder that the zinc supply chain was in a very different place to tin before the world first heard of the new coronavirus.

After a raw materials squeeze in 2017 and 2018, the zinc market was swinging to surplus with Chinese smelters ramping up production and the price sinking.

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This bear narrative has been challenged but remains largely intact, which is why the zinc price reaction to the loss of so much concentrate has been muted.

Rather, the real turnaround has taken place in the zinc concentrates market segment.

This year’s benchmark treatment charges, which are charged by a smelter for converting concentrates into refined metal, came in at a 12-year high of $299.97, reflecting an abundance of raw material.

Spot charges in China, the world’s largest smelting hub, have since fallen to $155 per tonne, according to state metals research house Antaike.

There are now signs that the cut in concentrates supply is feeding through to refined production, with China’s national output falling by 6% in May relative to April.

But with mines in Peru now starting to reopen, the impact on full-year refined metal output looks containable.

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For now.


Any assessment of how much metal production has been lost due to COVID-19 comes with an important caveat, namely that the virus has been successfully contained in producing countries.

Which is why copper and Chile are now in focus.

Although some major Peruvian copper mines were curtailed during lockdown, those in Chile largely carried on operating with the government taking a relatively light touch to a core export earner.

Chile’s national production of copper actually grew by 3.6% in January-April compared with last year, Macquarie notes.

Relative to size of market, the bank estimates copper mine supply has been less impacted than either zinc or nickel, while in terms of refined metal supply, copper has experienced the lowest losses among the base metals.

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JP Morgan pegs copper mine losses at around 440,000 tonnes, citing figures from research house CRU, and notes that is still only around 40% of the bank’s allowance for “normal” supply disruption this year.

But Chile’s light copper quarantine measures may be back-firing as coronavirus cases within the sector increase.

Unions have been pressuring companies to do more for the safety of their members, particularly those working for state operator Codelco, which has recorded three COVID-19 fatalities.

The company has just announced it is suspending smelting operations at its Chuquicamata division to focus reduced manpower and resources on maintaining basic mining operations.

Chuquicamata is Codelco’s second-largest volume operation after El Teniente with production last year of 385,000 tonnes.

The suspension of smelter operations is “transitory,” the company said, implying a relative quick return to business as usual.

But the coronavirus, not Codelco, will determine just how long the closure will last and whether the company might have to curtail more operations.

As JP Morgan notes, “it’s still a bit early to have strong confidence in a view that there will not potentially be a second wave of closures, particularly given the comparatively high rate of infection in Chile and Latin America in general.”

The key take-away is that COVID-19 is still far from defeated and until it is, the hit to metal supply remains a moving target.

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