Copper Miners Must Tap New RegionsBy Bloomberg News - May 30,...

Copper Miners Must Tap New Regions
By Bloomberg News - May 30, 2011 3:11 PM GMT+1000 .
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Business ExchangeBuzz up!DiggPrint Email .. Copper tubing is for sale at a store in Shanghai. Demand for copper has jumped as China builds more infrastructure and emerging-market consumers buy more appliances. Photographer: Kevin Lee/Bloomberg


Play VideoMay 26 (Bloomberg) -- Chilean President Sebastian Pinera talks about the price of copper and economic growth in emerging markets. He speaks from Paris with Bloomberg's Kelly Cregg. (Excerpt.Source: Bloomberg)
.The global copper-mining industry needs to expand to new regions if producers are to bring supply back into line with unprecedented demand, according to a mining- studies group in Chile, the world?s largest producer.

So far, the industry?s reaction to record prices has been slow because of declining ore grades, the need for deeper mines and higher costs, Juan Carlos Guajardo, executive director of the Center for Copper & Mining Studies, said yesterday.

The global copper market faces a 377,000-metric-ton deficit this year, according to the International Copper Study Group, as demand, led by China and other emerging markets, outpaces supply. Copper futures in London surged to an all-time high in February.

?Since mining is a long-term industry, more time is needed to reach a new equilibrium in the copper market,? said Guajardo, speaking at a Shanghai Futures Exchange conference. By 2015, a further 2.1 million tons of capacity is needed, he said.

Copper for delivery in three months on the London Metal Exchange climbed to a record of $10,190 a ton on Feb. 15 after gaining 30 percent last year and more than doubling in 2009. The contract closed at $9,199 a ton on May 27, rallying 2 percent after Chinese stockpiles dropped. The metal for July delivery on the Comex in New York fell 0.8 percent to $4.1545 a pound at 12:46 p.m. Shanghai time.

Guajardo?s assessment is similar to the outlook from Rio Tinto Group, the third-largest mining company. New supply is particularly dependent on opening up so-called greenfield projects and is moving to higher-risk regions, Matthew Holcz, general manager of business development at the London-based company?s copper unit, said in an October 2010 presentation.

China?s Growth

Copper is used in pipes and wires. Demand has jumped as China builds more infrastructure and emerging-market consumers buy more appliances. Demand from China?s power industry may expand 5 percent this year, while transport-industry use may grow as much as 10 percent, Mark Loveitt, secretary-general of the International Wrought Copper Council, said at the conference.

There have been ?significant production disappointments? in the global copper industry over the past five years driven by falling ore grades, power and water shortages, strikes and extreme weather events, UBS AG said in a report on May 18. As a result, mining companies are targeting mergers and acquisitions rather than developing new sites, the report said.

?Exploration is the most relevant way, but it takes time, while the maximization of current capacity is limited,? said the Center for Copper?s Guajardo.

Chile?s Outlook
Copper prices are expected to remain high even if China?s economy slows, Chile?s President Sebastian Pinera said in an interview with Bloomberg Television on May 25. While economic growth in China may slow to 7 percent to 9 percent, that would still be enough to keep commodity prices high for ?a very long period of time,? Pinera said.

?China?s emergence as a major consumer of copper, most of which is imported, is now the major swing factor in the copper market, as is the issue of how fast supply additions can come into the market,? the UBS report said.

Kazakhmys Plc (KAZ), the biggest Kazakh copper company, said May 4 that its first-quarter production of finished copper fell from a year earlier on lower ore grades. A day earlier, Boliden AB (BOL) reported lower copper output. Codelco, the world?s biggest producer, said May 3 output at its largest mine will drop ?strongly? during conversion into a subsurface operation.

?The market has been reminded about how tight the supply side looks for copper,? said Gayle Berry, an analyst at Barclays Capital in London. ?The Q1 production results for a number of copper miners underperformed people?s bleak expectations. It does further illustrate how tight the raw materials market is for copper.?





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