Supply and Demand Impacts on Global Copper Prices

Will slowing global economic conditions impact copper miners? Emerson’s Juan Carlos Bravo, a member of the metals and mining industry team, explores the forces impacting both supply and demand of this important metal.

Emerson's Juan Carlos BravoYou may have seen the news of the slowing of mining projects worldwide. As reported this week in a Wall Street Journal article, Copper Slips but Still Rises 2% in Week, copper has maintained it price with weak physical demand for copper in China has been offset by expectations that supply will remain constrained. Mining companies have tried to ramp up production to take advantage of prices that are high by historic standards but they have been hampered by geologic challenges as the quality of copper ore has declined. The WSJ article’s author noted:

In the first five months of the year, refined copper supply fell short of demand by 21,000 metric tons, the International Copper Study Group said this week.

In a Mining.com article, Chile on Chinese copper demand: Slowdown? What slowdown?, the author predicted that prices of copper will remain between $3.50 and $3.70 (US) per pound this year, still well above the cost of production–ranging between $2 and $3 per pound for higher-cost producers. The current economics continue to make copper mines viable.

Source: Bechtel.com

I think copper mining projects will continue to grow since it is an essential commodity with demand still high and supply still below demand. The proof is that you still can see big companies securing additional copper reserves, such as the recent announcement made by Codelco (number #1 copper producer in the world) on reaching an agreement with Anglo American to secure it future reserves in los Bronces mine in Chile. I believe that new project investments will slow down, but the pressure to maintain or ramp up production in existing mines will grow.

Copper miners will prosper as long as they can keep production and maintenance costs down and mine productivity up using technologies that we have discussed in earlier posts.

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