The world’s strongest earthquake in a year and hundreds of aftershocks rattled the copper-rich Atacama Desert last week, forcing almost a million people to seek refuge from tsunamis. The copper market barely reacted.
The metal is down 0.6 percent in London since Anglo American Plc to Antofagasta Plc temporarily halted some operations after an 8.2-magnitude temblor struck on the evening of April 1. Investors’ indifference is explained by surging global output at a time of waning Chinese demand growth.
As tremors continue to shake northern mines, it will be the prospect of the biggest global glut since the so-called super-cycle began — and how miners are reacting by shelving expansions and shoring up balance sheets — that dominate discussion at the industry’s annual get-together in Santiago this week. Chile, the top producer, is opening three mines in a year, more than it has started in the past decade.
“Demand is not going to grow by the same margin, which is going to generate a significant surplus,” Alvaro Merino, head of research at Chilean mining society Sonami, said in an April 4 interview. “You are really going to see this increase in the second half of this year.”
Thomas Keller, chief executive officer of Chile’s state-owned Codelco; Hennie Faul, head of copper at London-based Anglo American; and Antofagasta CEO Diego Hernandez are among participants at Cesco 2014. Their expansions will help lift Chilean production to a record 6 million metric tons, breaking a decade of stagnant output, Merino said. Codelco, the world’s biggest copper miner, KGHM Polska Miedz SA and Pan Pacific Copper Co. are all opening mines in the Atacama.
Widening Excess
The new mines will help increase global production by 4.7 percent in 2014 and 7.3 percent next year, according to the Lisbon-based International Copper Study Group. That compares with an estimated 3.2 percent demand growth and 3.6 percent in 2015. The ICSG, an intergovernmental organization of nations involved in the copper business, predicts a refined metal surplus of about 405,000 tons this year, excluding changes in unreported stocks, the biggest since 2001.
CRU estimates a surplus this year of 140,000 tons, Vanessa Davidson, copper group manager at the London-based metals researcher, said in a March 24 interview. That’s almost four times bigger than previously estimated. The excess will widen to about 250,000 tons in 2015 before exceeding 400,000 tons a year later, Davidson said at the time.
Copper for delivery in three months declined 10 percent this year to $6,619 a ton on the London Metal Exchange. Prices reached the lowest level since 2010 last month amid concern about slumping demand in China and a release of metal held as finance collateral.
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