Copper producers plan to expand mine capacity and output to record levels again this year, underlining potential additional downward pressures on prices, which have fallen steeply recently.
Prices for the red metal tumbled last week to the lowest level since 2010, amid signs of sluggish demand and the building up of inventories in China, by far the largest market for copper and most other metals. The copper market is closely watched as a gauge of global economic health.
Global copper miners – of which the largest are Codelco of Chile, Freeport-McMoRan, Glencore Xstrata and BHP Billiton – plan expansions of mine capacity that would add between 1.1m tonnes and 1.3m tonnes of copper annually to the market until 2016, according to data provider SNL Financial.
Such increases would be roughly equivalent to the annual output of Escondida, the world’s largest mine, which provides about 5 per cent of world supply.
“Mined copper supply is starting to expand at a faster pace than demand after a long period of constrained and disrupted output growth,” said Rio Tinto in its annual report published on Friday.
The expansion plans highlight how copper is one of global miners’ most favoured metals for investment, given expectations of robust demand over the longer term.
However, a number of the expansion plans may have to be delayed or revised if the current weakness in the market persists.
The planned capacity expansion would follow an increase of more than 6 per cent last year in worldwide copper output, which was significantly higher than the trend of previous years. Almost all the world’s largest copper miners expanded production.
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