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Is Copper a Strategic Metal?

Commodities / Copper Nov 08, 2012 - 02:53 AM GMT

By: Anthony_David

Commodities

Best Financial Markets Analysis ArticleIf your country’s main goal is to develop long term electrical infrastructure and distribution, then yes, Copper is certainly a strategic metal.  However, as a reflection of the sluggish economy, Copper dropped to a low of $7,930 per metric ton on the London Metal Exchange (LME). And the International Copper Study Group (ICSG) predicts that, despite the slowdown, the world demand for refined copper in 2012 will exceed supply by around 400,000 metric tons making it the third consecutive year of production deficit.


According to the US Geological Survey , Chile has the world’s largest copper reserves at 190,000 tons, followed by Peru with 90,000 tons and Australia with 86,000 tons. The ICSG’s World Copper FactBook 2012  states that in 2011, Chile was the largest copper producer with an output of 5.3 million tons which accounted for one-third of the world’s copper mine production. China, Peru, and USA produced over 1 million tons each, while Australia, Russia, Zambia, Canada, Indonesia, Mexico, Congo and Poland each produced between half a million and 1 million tons of copper.

Chile’s Codelco, the single largest copper producer in the world, holds 20% of the world’s copper reserves. The state-owned company achieved a record production of 1.735 million tons of copper in 2011 even though it struggled with strikes, bad weather and poor energy infrastructure.

Phoenix based Freeport-McMoRan  was the second largest copper producer in 2011 with a production of 1.68 million tons. The company operates copper mines in North America and South America, besides owning stakes in the Tenke mine in the Democratic Republic of Congo and the Grasberg mine in Indonesia.

BHP Billiton, with headquarters in Melbourne, produced 1.64 million tons of copper. BHP is a major stakeholder in the Escondida mine in Chile which is the second largest copper mine in the world producing around 240,215 tons of copper.

Glencore International (Baar, Switzerland) is set to buy out Xstrata this year and become the third largest copper producer, pushing BHP to fourth place. In 2011 Xstrata produced 889,000 tons of copper while Glencore produced 628,000 tons. Glencore has firmed up its position in Africa by acquiring majority control in the Mutanda mine in the Democratic Republic of Congo.

London-based Anglo-American produced 645,000 tons of copper in its Chilean mines. With the completion of its expansion plans, the production at the company’s Los Bronces mine is expected to double from 221,000 tons per year. Grupo Mexico produced 598,000 tons, while Rio Tinto, Southern Copper and KGHM Polska Miedz accounted for 591,700 tons, 587,400 tons and 543,000 tons respectively.

Copper production has picked up in Zambia and the country is expected to generate around 1.5 million tons annually in the next five years. However, safety concerns are an issue at the country’s Chinese-owned mines. In August this year, mining in Zambia was under a cloud due to violent riots and striking workers

Copper producers face problems of insufficient energy infrastructure, resource nationalization and labor strikes, especially in emerging economies. Despite these constraints, the ICSG forecast indicates that there will be around 458,000 tons of surplus copper by 2013. This can only mean that copper prices can be expected to fall further. One of the reasons for this is that China, the world’s largest consumer of copper (accounted for almost 40% of copper demand in 2011) is going through a slowdown phase. China’s stimulus measures to boost the economy will probably be shelved until the new leadership takes over next spring. With the slowing domestic demand for copper, Chinese producers like Jiangxi Copper Company are looking at cutting back on domestic sales and increasing exports to take advantage of strong LME prices.

If your country’s main goal is to develop long term electrical infrastructure and distribution, then yes, Copper is certainly a strategic metal.  However, as a reflection of the sluggish economy, Copper dropped to a low of $7,930 per metric ton on the London Metal Exchange (LME). And the International Copper Study Group (ICSG) predicts that, despite the slowdown, the world demand for refined copper in 2012 will exceed supply by around 400,000 metric tons making it the third consecutive year of production deficit.

According to the US Geological Survey , Chile has the world’s largest copper reserves at 190,000 tons, followed by Peru with 90,000 tons and Australia with 86,000 tons. The ICSG’s World Copper FactBook 2012  states that in 2011, Chile was the largest copper producer with an output of 5.3 million tons which accounted for one-third of the world’s copper mine production. China, Peru, and USA produced over 1 million tons each, while Australia, Russia, Zambia, Canada, Indonesia, Mexico, Congo and Poland each produced between half a million and 1 million tons of copper.

Chile’s Codelco, the single largest copper producer in the world, holds 20% of the world’s copper reserves. The state-owned company achieved a record production of 1.735 million tons of copper in 2011 even though it struggled with strikes, bad weather and poor energy infrastructure.

Phoenix based Freeport-McMoRan  was the second largest copper producer in 2011 with a production of 1.68 million tons. The company operates copper mines in North America and South America, besides owning stakes in the Tenke mine in the Democratic Republic of Congo and the Grasberg mine in Indonesia.

BHP Billiton, with headquarters in Melbourne, produced 1.64 million tons of copper. BHP is a major stakeholder in the Escondida mine in Chile which is the second largest copper mine in the world producing around 240,215 tons of copper. Glencore International (Baar, Switzerland) is set to buy out Xstrata this year and become the third largest copper producer, pushing BHP to fourth place. In 2011 Xstrata produced 889,000 tons of copper while Glencore produced 628,000 tons. Glencore has firmed up its position in Africa by acquiring majority control in the Mutanda mine in the Democratic Republic of Congo.

London-based Anglo-American produced 645,000 tons of copper in its Chilean mines. With the completion of its expansion plans, the production at the company’s Los Bronces mine is expected to double from 221,000 tons per year. Grupo Mexico produced 598,000 tons, while Rio Tinto, Southern Copper and KGHM Polska Miedz accounted for 591,700 tons, 587,400 tons and 543,000 tons respectively.

Copper production has picked up in Zambia and the country is expected to generate around 1.5 million tons annually in the next five years. However, safety concerns are an issue at the country’s Chinese-owned mines. In August this year, mining in Zambia was under a cloud due to violent riots and striking workers.

Copper producers face problems of insufficient energy infrastructure, resource nationalization and labor strikes, especially in emerging economies. Despite these constraints, the ICSG forecast indicates that there will be around 458,000 tons of surplus copper by 2013. This can only mean that copper prices can be expected to fall further. One of the reasons for this is that China, the world’s largest consumer of copper (accounted for almost 40% of copper demand in 2011) is going through a slowdown phase. China’s stimulus measures to boost the economy will probably be shelved until the new leadership takes over next spring. With the slowing domestic demand for copper, Chinese producers like Jiangxi Copper Company are looking at cutting back on domestic sales and increasing exports to take advantage of strong LME prices.

By Anthony David

http://www.criticalstrategicmetals.com

The mission of the Critical Strategic Metals Web Site

is to serve as a monthly compass for those who take a fundamental view of investment regarding the Molybdenum, Manganese and Magnesium metals markets, are concerned with the emerging critical under-supply of these strategic metals to Western nations and wish to profitability chart their course. Each month we will research and provide, in as short and concise a manner as possible, the most applicable information available on resources that will have the biggest impact on our day to day lives. Click here to sign-up for our FREE monthly report.

© 2012 Copyright  Anthony David- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


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