April 15, 2014 – Copper prices continue to hover just over the $3.00/LB mark at end of last week. This is better than just a month ago, but still a far cry from the $3.30 – $3.50/LB copper was trading a year ago and nowhere near topping out over $4.00/LB from three years ago.
Scouring the internet and experts’ Twitter pages show the general consensus seems to be that copper isn’t yet done dropping.
In the last month, copper has broken through its support price of $3.15 and fallen below $3 on the back of poor Chinese economic data and geopolitical tensions in Crimea. As you can see in the charts above, the red metal has bounced back a little, but optimism doesn’t appear widespread when it comes to copper demand in the short term.
Citigroup, for one, sees copper prices remaining under pressure in the near-term. “Manufacturing activity has also slowed in response to last year’s credit tightening, but we expect demand to reach a bottom soon,” the firm said in a report.
Investing.com’s Michael Lombardi predicts “[C]opper prices may be heading toward the $2.00 level or lower, another 33% below where they are today.”
Other analysts predict the balance between supply and demand will see-saw for some time before picking back up, making it a good time for investors looking to buy at lows to start considering some opportunistic investments.
Next week we will talk with an expert who suggests people on the commercial side of copper should look at what’s happening on the investment side.
As we mentioned last week, CESCO Week was held in the Chilean capital of Santiago. It’s the one big event every year where the world’s top mining executives and analysts meet to discuss the latest trends, challenges and opportunities in the industry. This year’s topics ranged from exploration spending to energy efficiency and the copper market outlook.
Here are some quotes from BNAmericas.com about what was said on the most pertinent issues facing the industry today:
“It’s a boom and bust business… currently it is a bust with expenditures down 39% and 24% for juniors and majors, respectively”
Rodney Thomas, president and director of PDAC on recent junior exploration trends.
“The majors acknowledge the need to continue exploring. Despite this, most of these companies cut exploration spending in 2013”
Jason Goulden, director SNL Metals & Mining, on the decline of global exploration spending.
“Every year we tend to be surprised, both myself and the broader community, by Chinese demand”
Max Layton, senior metal economist at Goldman Sachs on the outlook for Chinese copper consumption this year.
“We are paying developed country salaries while we have the productivity levels of a developing country”
Diego Hernández, CEO of Antofagasta Minerals, on copper mining in Chile.
“Without copper, our digital age would not exist. Facebook has a billion users, one out of every seven people on the planet. Without copper, this would not be possible”
Tim Alch, VP & senior minerals business analyst at Behre Dolbear, on the outlook for copper demand.
“Resource nationalism is becoming increasingly important in the copper concentrate market”
Christine Meilton, principal consultant, copper supply, CRU, on recent trends in countries such as Indonesia and Zambia.
“Where we’re really behind, shamefully behind, is in the issue of productivity”
Thomas Keller, the CEO of Codelco in a keynote presentation addressing competitiveness and productivity in Chile.
“We know about the lack of availability of mining properties for concession… and we’re studying how to perfect the current system to put an end to these potential entry barriers”
Chilean President Michelle Bachelet on the exploration concessions system.
“We seem to have a consensus about deficit further out, but the mining companies are not responding to that because they are extremely occupied with shareholder value”
Vivienne Lloyd, senior base metals analyst at Macquarie on the outlook for the copper market.
“If energy represents 20% of miners’ costs, what has to happen in the industry for companies to look at their operations with a long-term view towards energy efficiency and take the leap in that direction?”
Chilean energy minister Máximo Pacheco on the need to look for energy savings in mining processes and systems.
“Chile’s ore grades are not only going down in absolute terms, they are also becoming relatively worse in comparison to the rest of the world”
Peter Beaven, president copper, BHP Billiton, on the need to improve productivity to counteract grade decline.
“The incentive price for new copper projects was US$2,000/t (US$0.91/lb) in 2004. Now it’s over US$7,000/t (US$3.175/lb)”
Vanessa Davidson, group manager, copper, CRU, on the outlook for new copper projects.