A copper supply shortage is looming, but top tier copper resources that could fill the supply gap are not only hard to find, but would take time to turn to account.
Independent consultancy GFMS says a copper deficit of 88 000 t is likely, which, it says, is likely to push the copper price to $7 500/t in 2010.
BHP Billiton base metals marketing director Dave Martin says: "We have a challenge in copper supply and need the industry to develop resources."
Martin calculates that there will be a copper supply gap of 10-million tons in 2020.
He arrives at the figure by adding the supply from the current mines, planned expansions, mines under construction and probable greenfield expansions.
Some of that gap will be filled by copper scrap, but the question remains about how all of it is going to be filled.
GFMS expects higher prices each year, stretching out to 2012.
While copper use is popularly said to in virtually everything from vehicles to ordnances, things military hardly feature on the charts showing the main copper demand drivers these days.
The vehicle-related and general consumer-related copper sales are collectively up there as the biggest single driver of demand, and growing in prominence is the use of underground copper cabling that is being used increasingly to distribute electricity, particularly in China.
Sensing the opportunity, small newcomer miners are keen to enter copper mining in the Democratic Republic of Congo (DRC), despite the perceived political risk there, as well as in Zambia, and medium-size companies, already are keen to expand in those countries.
Ironically, it is the bigger companies, still protecting themselves from the potential fallout from the global economic meltdown, that talk of waiting a while before investing heavily in the DRC in particular in order to avoid putting "risk on risk".
The fears about investing in the DRC have resurfaced as a result of the clampdown on copper miner First Quantum by the general prosecutor of the Katanga province. First Quantum has had to stop its Kolwezi project, which is 65%-complete, because the Katangan general prosecutor "sealed" off of the property without a court order.
BHP Billiton chief commercial officer Alberto Calderon drew attention to this action when Ambrian Capital mining analyst Peter Davey asked why BHP Billiton was not pursuing copper opportunities in the DRC.
"Even for the ‘very green' prospect, it's complicated," Calderon replied.
The political risk is not deterring South Africa's JSE-listed, black economically empowered African Rainbow Minerals (Arm).
Arm CEO André Wilkens tells Mining Weekly that he wants his company to be producing at least 100 000 t/y of copper in five years from deposits in the DRC and Zambia.
The financially constrained JSE-listed Metorex is another South African company well advanced with its Ruashi copper/cobalt project in the DRC and wanting to emphasise the copper part of its diversified portfolio.
Arm has a joint venture with South American major Vale and intends focusing initially on the assets of Arm's former Teal exploration company at the Konkola North copper project in Zambia, and in copper/cobalt in the Kalumines prospect in the DRC.
"Copper is a very good commodity to be in and we are going to keep our eyes open and try to expand in copper as soon as possible," Wilkens reiterates to Mining Weekly.
Metorex CEO Terence Goodlace says company is going all out to lift copper production at Ruashi to a higher level.
"We have a plant that can do 180 t on the hydrometallurgical circuit. Ultimately, once the crushing circuit has been fully commissioned - and that should be towards the end of the year - it will then be up to us to see if we can feed this plant 1,44-million tons a year," Goodlace tells Mining Weekly.
That will translate into a copper output of between 40 000 t/y and 45 000 t/y of copper and 3 500 t/y of cobalt, from pre-recovery head grades of 3,2% copper and 0,39% cobalt.
But the activities of these South African companies are drops in the ocean compared to the activities at the huge copper mines in South America, including Escondida, in Chile, the world's largest.
Africa has largely lost out on copper, after the halcyon days of the Copperbelt was ended largely by political uncertainty.
The view of several market analysts is that China will provide the demand in growth over the coming years and that the mining challenge will be the meeting of that demand.
Zambia's Mines Minister Maxwell Mwale says BHP Billiton will soon start exploring for copper in western Zambia, using specialised equipment to measure the magnetic properties of rocks.
"The use of the plane with modern technology will enable easy identification," Mwale said.
Zambia says it will continue to encourage mining companies to venture into mineral exploration and mining, but this is going to take time.
Meanwhile, it is being increasingly reported is that the world will remain short of copper for in the medium-to-long term.
As a result, copper scrap is expected to gain market share, Chinese demand for imported copper cathode and for imported copper concentrate is expected to grow.
Reports already say that the increase the demand for copper cathode from China is substantial.
Martin forecasts an increase in demand for copper cathode in China of 22% in 2009 and a decrease of 8% from rest of the world, giving a total global increase for cathode demand in 2009 of 1%.
The three major drivers of Chinese demand are seen as scrap replacement by cathode; a restocking by China's State Reserves Bureau (SRB), fabricators and traders; strong domestic Chinese consumer demand; and infrastructure development, driven partly by the Chinese government's economic stimulus package.
GFMS juxtaposes strong Chinese consumption recovery with slower mine production growth in arriving at the 8 000 t 2010 deficit.
The consultancy expects the market deficit to trigger additional investor interest in the metal, which will further boost prices.
GFMS expects the magnitude of the copper deficit to grow to 121 000 t in 2011 and 176 000 t in 2012.
"It should be noted that not all of the inventory reduction will take place on the London Metal Exchange as we believe that there has been a build up of unreported inventories within China," GFMS adds.
Martin reports that China's imports of copper scrap have fallen by 36% in the first half of 2009 compared to 2008.
He assumes a 3% year-on-year growth for semi-fabricated consumption in 2009, with the scarcity of scrap having significantly boosted the demand for cathode.
Martin believes that cathode demand will moderate in the last quarter of 2009, as improving economic conditions lead to greater scrap generation, and the price increase result in greater incentive to recycle.
SRB is believed to have bought 230 000 t of copper on a net basis and that Chinese fabricators have bought 600 000 t during the period of restocking.
Chinese car production increased 23% in the first half of 2009 , refrigerator production by 33% and there was also strong "floorspace" growth.
The observations are that China has less scrap and lower mine production, causing the 160% year-on-year increase in the importation of copper cathode.
Martin reports that China's per capita copper growth is rising to 4 kg, and he expects this to more than double by 2025.
He sees power distribution as a major demand driver owing to copper being preferred as underground distribution cable, and replacing overhead aerial transmission cables - which are made mainly from aluminium - in the process.
China currently has a 60/40 aerial/underground split, compared to the 25/75 split in France.
Martin postulates that copper usage in the underground electricity distribution sector will increase by 2,5-million tons a year by 2025, if the transition to underground cables in urban areas evolves to a ratio of 40/60 by 2025, and power distribution infrastructure grows by 2,5%, both being reasonably conservative estimates.
There is also considerable scope for car ownership in China to trend towards the ownership levels of developing countries.
While in China there are only 16 cars for every 1 000 people, there are the same number for every 344 people in Portugal, 480 in the US, 495 in the UK and 171 in Malaysia.
Increased copper consumption is also expected to result from increased purchases in China of air conditioners.
Currently there are 57 air conditioners for every 100 Chinese households, and modest increases in the penetration of these is expected.
Other copper-containing consumer articles are also expected to rise to levels closer to the position in developed countries.
Global demand for copper cathode is some 18-million tons a year, of which three-million tons are met by scrap; three-million tons by cathode; and 12-million tons from refined concentrate.
If the copper price rises strongly, analysts point to the possibility of substitution of copper for other materials as anxious producers look for alternatives.
While it is true that pig iron nickel began substituting nickel when the nickel price soared, Martin's response is that he takes substitution into account when he puts his forecasts together and reminds analysts that the copper market continued to grow when copper was at $8 500/t last year.
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