Categories: Base Metals / General Market Commentary
Topics: General Base Metals / General Market Commentary

Copper industry sees worst of crisis over, but recovery gradual

The copper business will recover from crisis mode after plummeting prices for the metal resulted in output cuts, industry executives said at a meeting in world top copper producer Chile this week, but they expect that incipient recovery will be slow.

"The market seems to have left behind its worst moment, although it's very premature to anticipate a new cycle of high prices," Chilean Mining Minister Aurora Williams told the conference.

Views varied from extremely wary to bullish at the CRU World Copper Conference in Santiago, but the overall atmosphere was more positive than in recent years. Most delegates agreed that fundamentals such as a lack of new projects and Chinese demand would likely support the copper price.

Most in the market agreed that prices would likely converge at around $3 to the pound over the next two to three years, Oscar Landerretche, chairman of world No. 2 producer Codelco [COBRE.UL], told Reuters.

Copper was trading at around $2.70 on Wednesday, up some 27 percent since its low point at the start of 2016. Yet it remains far below its peak of $4.50 during the heady days of 2011.

Rio Tinto's copper and diamonds unit chief Arnaud Soirat said copper prices would draw support from factors such as limited new greenfield projects, ore grade decline and end-of-life mine closures over the next few years.

"Copper's long-term fundamentals are quite positive, and we expect to see further demand growth from emerging markets," he said, forecasting a small deficit this year.

Copper consultancy CRU was forecasting an upward trend in prices through 2021, said its director of copper research, Vanessa Davidson.

"We expect pressure on costs to continue...but we see copper prices rising faster than operating costs, ensuring that profit margins increase," she said.

However, some warned that a dose of caution was in order.

Many said U.S. President Donald Trump's administration could help the copper sector by boosting infrastructure spending, but hurt global trade with greater protectionism.