SANTIAGO - It's unanimous: Even with buoyant copper prices reviving major multibillion-dollar copper mine projects that are scheduled to start up in the middle of this decade, there's little chance of a supply glut looming.
After a two-year pause, copper miners are once again embarking on a wave of new projects like Mongolia's Oyu Tolgoi, the Tampakan mine in Philippines and a pair of Peru developments that could deliver a sizable wallop of copper around the 2013 to 2015 period, given normal lead times.
Executives' confidence that this won't create another price-weakening supply-side surge is built not only on a strong faith in the unyielding rise in Chinese demand, but two other factors: the increasingly costly struggle to sustain output at old mines, and the industry's long, well-established track record at failing to deliver major projects on time.
The industry's widely shared consensus that the next few years will be strong was little surprise at the world's biggest copper conference, CRU/CESCO; the equal conviction of strength even three or five years ahead is more unexpected, given the raft of projects now on the cards.
But far from a glut, most analysts and executives looked ahead to years of shortage, or at best a delicate balance, underpinning their belief that prices that have nearly trebled from late-2008 lows could be a permanent market feature.
"The world's copper mines are like little old ladies lying in bed waiting to die. They require these very high copper prices to be kept on oxygen," says Robert Friedland, chief executive of Ivanhoe Mines, whose Oyu Tolgoi is one of the flagship developments of this period, due to yield 450 000 tonnes a year from 2013.
Others cited repeated delays to big projects at a time when new developments are going to be more geologically complex and located in riskier countries than before.
"A bust like ones we've seen in the past doesn't seem likely," said Bart Melek, global commodities strategist at BMO Capital Markets.
MOVING FORWARD
That major sources of new supply are in the pipeline is undeniable.
Ivanhoe and its partners signed the final agreement to proceed with Oyu Tolgoi last week.
Xstrata, the world's No. 4 producer, is among the most ambitious, with plans to expand production by 60 percent to nearly 1,5-million tons annually by 2014.
Its Peru projects, Las Bambas and Antapaccaya, which should get the final green light this year or early next, should start up around the end-2013 or early 2014, delivering more than 500 000 t a year of capacity in a concentrated dose.
That's excluding the huge Tampakan development in the Philippines, which could deliver 450 000 tonnes a year, and which Xstrata hopes to execute during the next presidential term that begins this summer -- and would end in 2014.
"We see supply continuing to be constrained and that provides us a lot of confidence to invest," said Charlie Sartain, chief of Xstrata Copper.
Analysts largely shared the upbeat view. Mike Jansen, head of metals research at JP Morgan, said deficits could actually grow deeper, not shallower, beyond the middle of the decade.
And the perception of a shortage, at least in the near term, is also helping fuel current price gains as copper market investors look beyond the steady rise in LME inventories to fret about future supply, creating a disconnect between stocks and price, says Max Layton from Macquarie.
DECLINE
Meanwhile other parts of the industry are investing more just to stand still, and the less-visible decline in existing operations will undercut any new supplies.
BHP Billiton is reviewing whether to push ahead with the full $7,6-billion Phase V investment in Chile's Escondida mine, which is now expecting to hold production steady after two years of steep declines that cut output by nearly 400,000 tonnes, equivalent to about 2 percent of world demand.
That development would replace an existing concentrator, helping sustain but not necessarily increase production.
In Indonesia, the workhorse Grasberg operation will face a disruptive transition from the current open-pit operation to a more costly underground mine around the middle of this decade, resulting in at least a brief disruption in supply as it shuts down the pit before commencing underground mining.
"We have what we call our valley (in terms of production) and we're looking at ways of expanding these other underground operations or stockpiling to limit it," Richard Adkerson, Chief Executive of operator Freeport McMoRan told Reuters.
While the pessimism over future supply is a compelling argument in its own right, set next to the demand-side story it becomes overwhelming.
"Clearly as the price lines up there will be more people pushing more projects, but...if all the predictions about China and India are even remotely correct, I cannot see how it is going to be easily met by supply," said Andrew Harding, chief of Rio Tinto's copper business.
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