Copper miners eye higher prices (September 29, 2003)

Vancouver — After years of cutting back production because of low prices, the world’s largest copper miners are optimistic the market for the red metal will improve in 2004.

Phelps Dodge (PD-N) expects copper to hit US85 per lb. next year, whereas Chilean state-owned miner Corporacion Nacional del Cobre de Chile (Codelco) is predicting it surpasses US80.

Says Phelps Dodge CEO Steven Whisler: “Consumption in China is very strong, in the Far East it is generally strong, and there are signs Japan is coming out of a ten-year slump.”

Codelco President Juan Villarz is likewise hopeful: “If the U.S. economy consolidates, if China and Southeast Asia maintain the rhythm they have shown to date, I think that in 2004 we should be above eighty cents U.S. per pound, and we should end this year near eighty-five cents.”

Codelco expects to produce 1.8 million tonnes of copper in 2004, or 10.4% more than this year’s projected output of 1.6 million tonnes. The major produced 1.5 million tonnes in 2002.

Phelps Dodge and Codelco, account for 20-25% of the world’s copper output.

Southern Peru Copper (PCU-N), that country’s leading copper producer, predicts the price will end 2003 at US79 per lb. and rise to US85 next year. The company is owned by Grupo Mexico.

Over the past two years, low copper prices have prompted the top five global producers to curtail production.

Codelco has cut 106,300 tonnes of copper output from four of its five operations, with the biggest cut, 50,000 tonnes, occurring at Chuquicamata.

Meanwhile, BHP Billiton (BHP-N) responded to weak demand in November 2001 by announcing a 170,000-tonne reduction in copper output. The move was accomplished by scalebacks at the Escondida mine in Chile and the temporary closure of the sulphide operation at the Tintaya operation in Peru.

The major subsequently extended the cuts in December 2002, removing an additional 80,000 tonnes from Escondida.

BHP owns 57.5% of Escondida, the world’s largest copper mine. The remainder is held by Rio Tinto (RTP-N), with 30%, a Japanese consortium, with 10%, and the World Bank’s International Finance Corp., with 5%.

The spot price for copper last hit US85 per lb. in February 2001.