Copper prices have dropped on average by 6 percent during 2014, dipping below the psychological US$3/lb in October for only the second time since March´s near 4 year low. Slowing demand from China and the EU coupled with an expectation that supply will exceed demand in the medium term has placed downward pressure on prices. This is despite the fact that current prices are enticing some opportunistic buyers to stockpile as they take advantage of lower prices.
“Price pressure is likely to remain, at least for the medium term as the market shifts to excess supply.”
- Maritza Araneda,
KPMG in Chile
A raft of new mines are expected to come online, with Peru leading the way. The Latin American country has communicated its intention to become the second largest producer of copper behind Chile and expects production to double to 2.8 million tonnes by 2016.1 Indonesian exports have also resumed after the export of concentrates were stopped earlier this year as the government sought to encourage domestic processing.
Another government seeking to spur on production is the Chilean government who approved a $4 billion capital contribution to state owned Codelco. This is aimed at increasing Codelco´s output to 2 million tonnes per annum.2
Notwithstanding the effects of the likely surplus in the medium term, it is expected to be temporary as long-term optimism in the copper market remains.
1Perú duplicará producción de cobre y sería segundo a nivel mundial en el 2016”, Ministerio de Energia y Minas, July 7, 2014
2“Ministros de Hacienda y Minería anuncian histórica capitalización de Codelco por hasta US$4.000 millones para período 2014-2018”, Ministerio de Hacienda, August 1, 2014