Copper back in deficit in three years – CRU
CAPE TOWN (miningweekly.com) – The copper market, which has seen prices fall to their lowest level in five-and-a-half years, will be back in deficit in 2018, says CRU group manager Vanessa Davidson.
Despite the China slowdown and the short-term challenges, Davidson says that copper’s fundamentals remain fairly solid and do not justify the low current price levels, which are partly sentiment driven.
Project delays alone, she says, will keep 50 000 t a year of supply out of the market and the most obvious further supply-curbing reaction will be to close high-cost mines.
Larger projects have already been downsized and falling copper grades mean more material needs to be mined just to stand still.
The key point is that mining production from existing mines will continue to fall steadily and another complication is the rising pressure on clean concentrates required for blending with custom complex concentrates.
Some 56% of potential new mine supply is in the Americas, with Chile being the single most important country but with many challenges to production owing to mines getting older and deeper there.
In Africa, output has increased fourfold since 2002, but while Africa has great potential, it is being held back by a shortage of energy, water and transport infrastructure plus resource nationalism.
In Zambia, value added tax rebates are being held back and royalties are being increased from 6% to 20% for opencast mines.
Against that background, African mines tend to be in the third- and fourth-quartile of high cost, despite having far higher grades.
Globally, the average capital expenditure for tier one projects is still double the level of early 2009 and operating expenditure remained 50% above 2007 levels.
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