Mining in 2015: Copper price topped

Mining in 2015: Copper topped

Cathode to go

What happened in 2014:

The price of the red metal briefly dipped below $3 a pound in March – a near four-year low – on market expectations of a move into surplus after years of deficits.

By the third quarter it was clear mining output and shipments were falling far short of predictions thanks to suspended Indonesia concentrate exports and (surprise, surprise) project delays and production disruptions.

While oversupply fears proved to be overblown, copper is ending the year down 15% near its lowest for the year as uncertainty over Chinese consumption continues to gnaw at investors.

How things could change in 2015:

While not all of it will reach markets, forecast mine output growth through the year of 6% or 1mt and another 800kt in 2016 is still a lot to absorb.

Falling oil, the top input costs for all miners bar those lucky enough to sit on copper oxide, could also have the perverse effect of keeping high-cost mines in the game for longer, further depressing prices.

China’s refined output is racing ahead hitting a record 7.2mt from January-November, up 11.5% year-on-year and more capacity will come on stream 2015.

There’s nothing like a crises to focus minds so Mongolian politicians could even resurrect Oyu Tolgoi’s much anticipated and mammoth phase II while other long shots like Iran – expected to produce 300kt in 2015 no less – returning to the market could weigh on the price beyond 2015.

There is price upside potential: Too much is being asked of Chile and Peru which together must bring 7.5mt to the table in 2015. Codelco’s problems with arsenic, grades, labour and funding are well documented.  And Peru’s new flagship projects like Las Bambas and Constancia still needs work.

Price end-2015:

Not much below $3/lb (and that counts as bullish) and a rising trend into 2016.

All bets are off if…

China State Grid Corp’s $65 billion annual fixed investment budget plus rollover from funds unspent during 2014 finally gets deployed.


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