This week was full of massive news from the major natural resource producers.

First, as we mentioned earlier, the Organization of Petroleum Exporting Countries+ (or OPEC+, which also includes Russia) decided to cut its oil production.

The group will reduce output by at least a million barrels of oil per day. That’s a significant cut, and it will change the global supply-demand balance. The announcement immediately sent the price of crude up.

But that wasn’t the only shocking news from the resource sector.

Chile, the leading global producer of copper, provided an alarming update on its operations.

The country’s monthly copper production is at its lowest level in six years.

Unlike the output cut decision that OPEC+ made, Chile’s falling copper production isn’t the result of some decisions made behind closed doors.

The country is facing a production crunch.

The lack of major investments in the Chilean copper sector led to a shortage of new copper mines.

Instead of developing the next high-grade copper asset, local miners work on the lower-grade leftovers. This directly affects ore quality and production volumes.

The country also restricted water usage, making it nearly impossible to run copper mines at full capacity.

Rising energy and labor cost didn’t help local miners, either.

As a result, the largest copper producer in the world posted a steep drop in its output.

Unless the country fixes its supply chain and immediately starts investing in copper exploration, we’ll likely face higher copper prices by the end of this year.

But the outlook isn’t promising…

Codelco, the largest Chilean state-owned miner, noted that its copper output dropped 10.6% in 2022 compared to 2021. And for this year, the company expects another 7% fall in production.

That’s a major threat to a global copper market balance. With less copper on the market, final users will pay more for what’s left.

This is a very bullish setup for the price of copper, in our view.

And while OPEC+ limits oil supply to lift prices, Chile faces real troubles with no simple fix.

Meanwhile, copper demand is rising after China finally lifted its Covid-19 restrictions. The largest copper consumer in the world is ramping up economic activity and boosting demand for most raw materials.

This is where we’re facing diminishing supply and growing demand. None of it would be a problem if plenty of copper existed in the global warehouses.

But it doesn’t…

Global copper inventories are at multi-year lows. Goldman Sachs estimated that the entire global stockpile can be depleted by the end of this year.

That’s not sustainable, and the copper price could be poised for a healthy uptrend.

Investors should pay attention to this trend and keep copper mining companies on their radar. They will directly benefit from the rising prices of the underlying metal.

Deep-Sea Mining Gets a Green Light

The United Nations (UN) seems to approve of deep-sea mining.

The UN allowed sending applications to the International Seabed Authority (ISA) for companies wanting to collect mineral-rich nodules on the ocean floor.

The nodules are potato-sized rocks with high nickel, copper, cobalt, and manganese content. All of these are in high demand due to the green energy transition trend.

If the UN approves deep-sea mining, it will create a new source of the critical minerals vital for a clean future.

However, an economically viable process of collecting nodules from the sea floor is yet to be established. It only works in theory and requires commercial-scale testing.

The ISA council will review applications and make a further decision this summer.

Companies that get deep-sea mining permits will access untapped mineral resources. These can deliver massive gains to their investors but also carry high risk due to the absence of expertise in the field.

It could either mint the first trillionaire or create another dot-com-like bubble. Probably both.

We will monitor this trend on your behalf.

Thank you for your loyal readership,

The Financial Star team