The magnitude 8.8 quake that struck central Chile on February 27 appears to have disrupted copper production and shipments more than originally reported as mining companies report at least 16% of country’s copper output still was closed last Friday according to Purchasing.com
It was no surprise to many observers that spot copper averaged $3.37/lb on the London Metal Exchange (LME) last week and futures for May delivery jumped to $3.41 on the Comex division of the New York Mercantile Exchange (Nymex). LME copper cathode averaged $3.11/lb in February.
The government of Chile is responding — as it should - to the human casualty toll along with devastated roads, bridges and communications. The latest concerns revolve around a potential outbreak of disease brought on by the effects of the devastation.
Largest Producer of Copper
Chile is the world’s largest producer of copper with the metal last year representing half of the nation’s $53 billion of exports. At least four copper mines responsible for 20% of the country’s output halted operations after the quake struck and early reports suggested they would be in operation quickly. However, Bloomberg now says Codelco and Anglo American, the largest mining firms, still have several mine operations shut with Codelco working to meet supply contracts from undamaged plants in the country’s north.
Chile’s copper output, which was 5.4 million metric tons in 2009, accounted for 29% of global supply, according to Barclays Capital estimates. So, problems with Chile’s supply are a concern among traders and buyers. The country also accounted for half of China’s record 3.19 million metric tons of refined copper imports in 2009, according to customs data.
Earthquake in Taiwan
On Thursday, the planet continued the trend as a major earthquake and several aftershocks struck Taiwan, the heart of many high tech, consumer electronics and apparel supply chains. The magnitude 6.4 quake struck near the city of Pingtung in the southern region. This quake was rather shallow (3.1 mile) in depth, and disrupted roadways, bridges and transportation, and damaged four undersea Internet cables in six different places.
This damage to the SWM-3 (Southeast Asia-Middle East-Western Europe 3) cable temporarily disrupted all Internet service between Taiwan and China’s Guangdong Province, the major coastal manufacturing region of China. Service has since been rerouted through other cables and networks. There were also service disruptions on the CUCN (China, US Cable Network), APCN (Asia Pacific Cable Network), and FLAG (Fiber Optic Link Around the Globe) North Asia Loop between Taiwan and Hong Kong.
Why so many quakes?
While the effects of these series of major earthquake disasters across the globe have indeed been devastating in human, infrastructure and supply chain disruption perspectives, it’s not necessarily an increase. In fact, according to the U.S. Geological Survey site, athough it may seem that we are having more earthquakes, earthquakes of magnitude 7.0 or greater have remained fairly constant throughout this century and, according to their records, have actually seemed to decrease in recent years.
While this may seem reassuring to most of us, it’s probably not to those in Haiti, Chile or Taiwan. Regardless, of whether major earthquakes are actually decreasing or not, supply chain professionals need to be prepared for such major disruptions.
