Meet the ASX stocks that can benefit from the Chilean riots

The deadly riots in Chile may be dominating headlines, but few are paying attention to how that could impact on ASX shares.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The deadly riots in Chile may be dominating headlines, but few are paying attention to how that could impact on ASX shares.

The violent protests that was triggered by an increase in metro train fares on October 7 have claimed the lives of at least seven people. Just like the Hong Kong riots, the civil disruption is threatening to stifle economic activity in the Latin American country.

The question investors should be asking is whether this is copper's "Brumadinho" moment.

Iron ore prices surged higher following the tragic Brumadinho dam disaster in Brazil as that crimped global supply of the commodity.

Copper market getting interrupted

Chile is the world's largest copper producer by a big margin. Even if you added the next three biggest copper producers (Peru, China and the United States), they still couldn't match Chile's 5.8 million tonnes copper output in 2018, according to data from Statista.

The market is yet to be spooked. The Comex copper price may have gained around 2% to US$2.63 a pound since the Chilean unrest, but it's still hugging the bottom of its 52-week trading band.

But if the riots were to escalate, it could curtail the global supply of copper. After all, the country is home to the world's largest copper mine, Escondida.

Workers at Escondida staged a 24-hour strike on Monday to show solidarity with protesters who are angry with the rising cost of living and social inequality, reported Mining.com.

Union No.1 is calling on all miners across Chile to down tools to paralyse the industry until military and oppressive forces are removed from the streets. The union may not have an imaginative name, but it's managed to gain the support of other unions, including the umbrella group of unions and mining federations called CTMIN.

ASX winners and losers

Any sustained disruption to Chilean copper output could drive prices of the red metal higher. Several of our miners will benefit from the demand-supply recalibration, but not BHP Group Ltd (ASX: BHP) and Rio Tinto Limited (ASX: RIO).

Rio Tinto's highly publicised troubles with the Oyu Tolgoi copper mine in Mongolia shows how difficult and costly it can be to bring new production online.

This leaves ASX copper miners with largely onshore operations in the spotlight. It's the OZ Minerals Limited (ASX: OZL) share price and Sandfire Resources NL (ASX: SFR) share price that could be the biggest beneficiaries of a Chilean-triggered copper rally.

It's safe to say that not much good news is priced into these stocks. OZ Minerals and Sandfire have been underperforming the broader market on worries of falling industrial production from the US-China trade war.

ASX mining investors should watch Chile closely.

Motley Fool contributor Brendon Lau owns shares of BHP Billiton Limited, OZ Minerals Limited, and Rio Tinto Ltd. Connect with him on Twitter @brenlau.

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Resources Shares

Female miner smiling at a mine site.
Resources Shares

Up 60% this year, this ASX 200 mining stock just smashed production records

Production surge headlines quarterly results.

Read more »

a man in a hard hat and high visibility vest smiles as he stands in the foreground of heavy mining equipment on a mine site.
Resources Shares

After lifting its price target, Macquarie now expects 36% upside from this ASX mining stock

The precious metals producer released better-than-expected production guidance.

Read more »

A miner in a hardhat and high visibility clothing makes a thumbs up symbol.
Resources Shares

4 reasons to buy Rio Tinto shares today

A leading expert forecasts strong growth potential for Rio Tinto shares.

Read more »

Man with rocket wings which have flames coming out of them.
Resources Shares

Why Macquarie expects this ASX All Ords copper stock could surge 38%

With costs coming in below expectations, this ASX All Ords copper stock could rocket higher over the coming months.

Read more »

Iron ore price Vale dam collapse ASX shares iron ore, iron ore australia, iron ore price, commodity price,
Resources Shares

Major miners up as China announces new mega project

Can a new mega-dam absorb iron ore oversupply?

Read more »

A young man sits at his desk with a laptop and documents with a gas heater visible behind him as though he is considering the information in front of him. about the BHP share price
Broker Notes

Leading broker has just downgraded BHP shares. Is it time to sell?

Macquarie sees little upside. But why?

Read more »

A young woman wearing a blue blouse with white polkadots holds her phone up with an intrigued and happy look on her face as she reads some news.
Resources Shares

3 reasons why the BHP share price could be a buy

Here are my optimistic thoughts on BHP.

Read more »

mining asx shares represented by miner writing report on clipboard
Resources Shares

This ASX 200 miner is ramping up copper output as prices reach all-time highs

Copper production leads quarterly update.

Read more »