A massive 8.0 earthquake just struck off the shore of Chile, and a tsunami warning has been issued.
One of the first markets to react was the commodities market with copper prices ticking higher.
It was a modest $US0.02 jump, but it was a clear and noticeable jump.
Why did this happen?
Chile is the largest producer of the world’s copper.
Check out the pink block in the chart below from Morgan Stanley.
For some context, here’s Morgan Stanley’s Adam Longson on the current state of the copper supply:
An acute global copper scrap shortage that ultimately cannibalised the refined market in China was the key driver behind lower-than-expected supply growth in 2H13. We expect this phenomenon to spill into 2014. Meanwhile, this year has already seen an extended strike at most of Chile’s key copper exporting ports which, according to Codelco, affected at least 20Kt of copper shipments.
All of this is a big deal because copper is arguably the most important industrial metal in the world.