SYDNEY, Dec 15 (Reuters) – Rio Tinto and BHP Billiton are amassing vast copper holdings in a push to capture a greater chunk of the $140 billion world market, apparently aiming to squeeze out high-cost producers just as they did in the global iron ore business.
Separately and in joint ventures, Rio and BHP intend to mine millions of additional tonnes of copper, despite seeing an oversupplied market for the next few years.
“For both companies, this is about wielding the greatest influence possible over the global marketplace,” said Gavin Wendt, senior resources analyst for Sydney-based consultants MineLife.
“Having said that, unlike in the highly concentrated iron ore space where the focus is squarely on one market owned in large part by Rio and BHP – China, copper is sold much more widely, leaving room for smaller producers to stay in the game,” Wendt said.
Several smaller producers contacted by Reuters declined to comment, saying it was too early to gauge the impact of the expansions. There have been no suggestions that BHP and Rio are working in concert to seize overriding control of global copper supply.
A worldwide supply surplus of 300,000 tonnes is forecast in 2015 by Australia’s Bureau of Resource and Energy Economics, equivalent to half a year’s output by South Korea.
Rio’s copper division head, Jean-Sebastien Jacques, told investors in December a shift back to a deficit in the market was unlikely before 2018 and that the company was now striving to “gain a clear advantage” against competitors and “build a business model that creates value through the economic cycles”.
BHP sees copper usage growing sharply in the next decade, partly on the back of a shift to renewable energy sources requiring copper-intensive apparatus. The metal has been designated a core pillar of growth by BHP’s board.
“The market has been generally cautious for 2015-16, but beyond that, most are comfortable with the long-term story,” said UBS commodities analyst Daniel Morgan.
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