These 10 mines will set the copper price for the next decade – by Vince Peckham ( – November 3, 2015)

Chile’s state-owned copper giant Codelco’s announcement today of another round of layoffs is just the latest sign of an industry under stress. Copper has recovered from six-year lows struck late August on the back of supply cuts by major producers but at around $2.30 a pound or $5,000 per tonne on Tuesday there isn’t much breathing room for producers.

The latest estimates by the Lisbon-based International Copper Study Group paint a very different picture from the previous forecast made in April. The market is now expected to be broadly in balance this year and to fall into a deficit of 130,000 tonnes in 2016. This compares with April’s forecasts of surpluses of 364,000 and 228,000 tonnes respectively.

According to ICSG World mine production, after adjusting for expected disruptions, is expected to increase by around 1.2% in 2015 to 18.8 million tonnes. 2014 recorded similar growth rates. The expected market shortfall in 2016 will be against a backdrop of higher mine output of around 4% expected next year.

The copper industry has a long history of these supply-side surprises however. Typical disruptions associated with adverse weather (exacerbated this year and next by El Nino, which create droughts on one side of the pacific and floods at the other), technical problems, power shortages and labour activity coupled with falling grades and dirty concentrates at old mines (pushing up unit costs) make forecasting a tough proposition.

Expansions, expansion, expansion

Longer term Wood Mackenzie predicts a 10 million tonne deficit by 2028. Supply to fill this gap is expected to arise from expansions at existing operations, ramp-up in production from mines that have recently come on stream and output from a few new mine projects. Crucial for the direction of the copper price are the development activity from copper’s top tier.

The world’s ten largest copper mines produced 4,315.2kt of fine copper in 2014 representing about 23.3% of the world total according to ICSG. But the fact that Codelco, which vies with US-based Freeport-McMoRan Copper & Gold as the world’s number one producer of the metal, is spending $25 billion over the next several years just to keep output steady is also telling.

Another indication of to what extent the copper price is dependent on the performance of a few giant operations is Escondida, the complex of mines and plants in Chile owned by BHP Billiton and Rio Tinto.

For the rest of this article, click here:

Comments are closed.