Copper’s Tumble Not Over With Most Miners Still Making Money – by Agnieszka De Sousa and Debarati Roy (Bloomberg News – July 28, 2015)

World copper mine production at record

The pain rippling through the copper market isn’t yet threatening profits for most miners, and that could mean more tears for bullish investors.

Even with prices near a six-year low, about 90 percent of copper mines are profitable, meaning most producers have little incentive to reduce output, according to Standard Chartered Plc. Prices need to fall another 24 percent before major companies begin cutting back, Bloomberg Intelligence estimates.

“You want miners to throw in the towel, start shutting down some mines,” Kenneth Hoffman, an analyst at Bloomberg Intelligence, said by telephone. “They keep forging ahead with all their plans. They’re still bringing new stuff on.”

As producers dig up more metal, demand for the raw material is weakening with China’s economy expanding at the slowest pace since 1990. Societe Generale SA estimates that copper’s oversupply will almost double this year. Goldman Sachs Group Inc. expects prices to reach $4,800 a metric ton in the next six months, a 9.4 percent drop from Tuesday’s settlement.

There are some signs the mine expansion will slow. Freeport-McMoRan Inc., the biggest publicly listed copper miner, has promised a sweeping operational review, is considering spending cuts and may adjust production, it said in a statement Tuesday. Power restrictions in Zambia could lower output in the second half of the year, TD Securities Inc. and RBC Capital Markets forecast.

‘Bleeding’ Stops

Antofagasta Plc cut its full-year production forecast by 6.3 percent from a February estimate because of delays in starting a new mine, it said Wednesday. The outlook for mining has begun to look shakier, Macquarie Group Ltd. said Wednesday.

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