Grupo México's Asarco May Reopen in the United States

Asarco, a mining company owned by Grupo México, is seeking to reactivate its copper smelter in the United States amid rising copper prices, an unnamed source told Reuters. If successful, the United States will be better equipped to meet its annual consumption of 1.6Mt.

Asarco, acquired by Grupo México in 1999, has been negotiating with unionized workers to resume operations at the Hayden smelter in Arizona and the Amarillo refinery in Texas. The Asarco smelter has been shut down for more than four years due to a labor strike. The smelter was additionally designated as a superfund hazardous waste site by the US Environmental Protection Agency.

Although Asarco's official reopening remains uncertain, it has been revealed that Asarco's priority is to first secure agreements with workers and subsequently with the smelter staff. Experts pointed that, if achieved, this could significantly increase the supply of copper in the United States, a country that currently relies on only two domestic smelters. According to data from the International Copper Study Group, the United States produced 880,880t of refined copper in 2023, while importing 770,900t and consuming more than 1.6Mt.

Grupo México is expected to benefit from the steady increase in copper demand, driven largely by the global shift to clean energy and the increasing adoption of renewable energy sources. Bloomberg projects copper demand to double by 2035, with forecasts indicating that the industry will not be able to keep pace with this growing demand, resulting in shortages that will push up copper prices. 

Goldman Sachs highlights that the current period marks the most challenging time for global mining supply since the COVID-19 pandemic in 2020. The current period is primarily defined by a decline in mid-decade growth, especially at the peak of supply. "Given the larger deficits, we have revised our year-end target for copper at US$12,000/t from US$10,000, while also raising our average price forecast for the entire year at US$9,800/t " reported Goldman Sachs.

The Goldman Sachs report notes a recent surge in market interest in copper producing companies, as evidenced by a notable increase in shares purchased. This rally has resulted in Latin American copper companies trading at higher EV/EBITDA multiples by 2024 compared to their averages over the past five years.