The world's second-largest copper mine "major accident" halts production, Wall Street: black swan! "Traders buy first, then ask questions"

A major mining disaster is causing the world's second-largest copper mine to halt production, triggering a strong shock in the global metal market.

On September 24, American mining giant Freeport-McMoRan (FCX) announced in a statement that its supply contracts had entered a state of "force majeure." This sudden event was quickly characterized by Wall Street as a "black swan event," igniting market concerns over a long-term shortage of copper supply and driving copper prices to soar.

Wall Street Journal wrote that the core of the incident is Freeport's Grasberg mine in Indonesia. The company confirmed that a massive landslide that occurred on September 8 resulted in the deaths of two workers, with five others missing. In response, the company has fully suspended production activities in the mining area and activated the force majeure clause, which allows producers to suspend the performance of supply contracts in the event of unforeseen disasters.

The market's reaction was immediate. Following the news, copper futures prices on the New York Mercantile Exchange (COMEX) rose nearly 4%, reaching $4.825 per pound. Freeport's stock price plummeted in pre-market trading, while competitors such as Glencore and Boliden saw their stock prices rise in response.

Ole Hansen, head of commodity strategy at Saxo Bank in Denmark, commented: “Traders buy first and ask questions later,” accurately depicting the market's instinctive reaction amid supply panic.

Goldman Sachs: “Black Swan” strikes, supply gap may reach hundreds of thousands of tons

Goldman Sachs' commodity team referred to the suspension of operations at the Grasberg mine as a "black swan event."

Analyst James McGeoch pointed out that the impact of this suspension is significant, estimating that the affected portion of the Grasberg mine will have "negligible" sales in the fourth quarter, and full production recovery may not occur until 2027.

He predicts that in the next 12 to 15 months, the market will lose 500,000 tons of copper supply as a result, with potential further losses of 1 to 2 million tons. He described this shock as equivalent to the simultaneous suspension of the three major copper mines: Cobre, Komao, and Los Bronces.

“Copper prices must rise as a result. Demand changes are linear, while supply changes are exponential.”

James McGeoch also emphasized that while Grasberg is the second largest copper mine in the world, it is also the largest gold mine globally. Although the company only holds 48.76% of the mine, which can somewhat mitigate its financial impact, the effect on the global market should not be underestimated.

According to data from Grant Sporre, global head of metals and mining at Bloomberg Industry Research, before the disruption, Grasberg's output accounted for about 3.2% of the total global copper supply this year. For Freeport itself, the mine is even more significant, contributing nearly 30% of the company's copper production and 70% of its gold production.

Chain Reaction of Supply Shock

Analysis by another Goldman Sachs analyst, Adam Gillard, further reveals its chain reaction. He believes that although the actual production loss this year may be around 150,000 tons, which is less than the initial headline figures, it will have a "disproportionately significant impact" on the Shanghai Futures Exchange (SHFE) and the London Metal Exchange (LME).

The logic is that due to tariff-related factors, the global copper market's excess inventory is currently mainly "trapped" in the United States. This means that when Indonesia's supply suddenly halts, buyers in London and Shanghai will find it more difficult to locate alternative sources. Gillard expects that LME inventories in Asia will decrease as a result, and the LME price spread will remain tight.

The shutdown at Grasberg has further amplified the vulnerability of the global copper market. Just before this incident, Hudbay Minerals also disclosed that due to ongoing political protests, a concentrator at its Constancia mine in Peru had suspended operations.

The simultaneous issues at these two top copper mines have intensified market tensions.

Copper and Gold Production May Plummet 35% by 2026

The impact of this shutdown is far from short-term. Freeport's preliminary assessment shows that the company has lowered its third-quarter copper and gold sales guidance, reducing expectations by 4% and 6%, respectively, compared to July 2025.

At the same time, the company expects that copper and gold production in 2026 may plummet by about 35% compared to previous estimates.

More critically, the company anticipates that it will not be able to return to pre-accident production levels until as early as 2027, casting a shadow over industries reliant on copper, such as global electric vehicles and renewable energy.

Long Recovery Period

According to information disclosed by Freeport, approximately 800,000 metric tons of wet material suddenly surged into the underground mines at Grasberg, an event that is "unprecedented" in the company's decades of mining history.

The incident occurred not only in the "PB1C" production block of the GBC mining area but also damaged the infrastructure needed to support other production areas, including railways, ore chutes, and power systems.

The company has developed a detailed recovery timeline, but the outlook is not optimistic.

Freeport expects that the unaffected mining areas will not restart until at least the middle of the fourth quarter of 2025, while the Grasberg mine will begin phased recovery in the first half of 2026 Natixis Bank analyst Bernard Dahdah stated, "An incident of this magnitude is unprecedented in Freeport's history," highlighting the severity of the event. Based on this timeline, the company expects copper and gold sales in the fourth quarter of 2025 to be "minimal."