Pune: Copper prices have risen 40% in four months to the highest in 16 months as the pandemic disrupted the supply chain, rating agency ICRA said.

“The mining restrictions due to the pandemic is estimated to have resulted in a sharp drop in the production of copper ore during Q2 CY2020. This is progressively resulting in a shortage of the finished metal in the market and the prevailing situation may continue in the near term, which is fueling metal prices upwards,” it said.

Prices have risen from a three-year low in March 2020, said Jayanta Roy, Senior Vice President and Group Head, ICRA. “While the macro-economic uncertainties due to the pandemic have impacted global copper demand, resulting in a contraction in consumption by ~2.5% in Q1 CY2020, the supply-side impact of the pandemic on the other hand has resulted in a V-shaped recovery in prices,” he said.

Almost half of the world’s copper ore is mined in South America, primarily in Chile and Peru, where mining output has fallen almost 50% because of the pandemic, ICRA said. The disruption has resulted in lower primary metal production from the beginning of June 2020, it said.

In India, Hindustan Copper Ltd (HCL) is the only copper miner and Hindalco Industries NSE -0.39 % Ltd (Hindalco) is currently the only operating copper smelter-cum-refiner in the country. “Under the prevalent situation, HCL is likely to benefit from the buoyant price levels. The overall benefit however would be constrained by restricted operations due to the pandemic. On the other hand, Hindalco’s margin from copper operations would be impacted by the correction in TC/RC,” said ICRA.