Xstrata Says China Copper Demand to Recover, Reducing Stocks
Xstrata Plc (XTA) said a build-up in copper stocks, responsible for the metal’s worst first quarter in a decade, will end in “the next couple of months” as buyers return to the marketplace.
Chinese demand may recover to grow 6 percent this year, Charlie Sartain, who runs the Zug, Switzerland-based company’s copper business, said in an interview in Santiago yesterday. Demand is also recovering in Europe and the U.S., he said.
Copper prices jumped about 30 percent last year as mining companies struggled to meet rising demand. The metal fell 1.8 percent in the first quarter of this year, the biggest decline for the period since 2001, as Chinese buyers consumed existing stockpiles and the country boosted scrap imports.
“Both of those trends I think will have an endpoint within the next couple of months,” Sartain said. “Then we’ll see demand picking up again.”
Copper demand in the U.S. may grow 6 percent this year while mine supply will lag behind demand again this year as suppliers face disruptions, Sartain said.
The Collahuasi mine in northern Chile was affected by heavier-than-normal rainfall in the first quarter, John MacKenzie, the head of Anglo American Plc (AAL)’s copper business said in an April 1 interview. Anglo and Xstrata each own 44 percent of Collahuasi.
The rain interruptions extended to Teck Resources Ltd.’s Quebrada Blanca mine in northern Chile, spokeswoman Claudia Onetto said yesterday. Xstrata’s Tintaya mine in neighboring Peru was also affected, Sartain said.
There are “consistently shortfalls” in the copper industry, mainly because of declining ore quality in aging mines in countries such as Chile, Sartain said. “What you see this year is an ongoing continuation of that.”
While Anglo American is aware of stockpiling of the metal, “we don’t see a flood of that coming back onto the market,” MacKenzie said at the same conference. There is evidence of acceleration in copper demand in recent weeks, he said.
Global stocks remain at low levels and there is consensus about the metal’s “solid market fundamentals,” Diego Hernandez, chief executive officer of Codelco, said at the event.
Freeport-McMoRan Copper & Gold Inc., the world’s largest publicly traded copper producer, is “very confident” about long-term demand from China, Chief Executive Officer Richard Adkerson said today in an interview.
Copper for three-month delivery erased a drop of as much as 0.7 percent to rise 0.5 percent to $9,374 a ton on the London Metal Exchange at 10:39 a.m. New York time. Copper for May delivery rose 0.4 percent to $427.05 a pound in New York.
Xstrata will become the world’s largest producer of copper concentrate by 2014 when its Las Bambas mine in Peru starts production, Sartain said.
The company plans to increase production to 1.5 million metric tons of copper by the end of 2014. This year the company probably will produce a little more than last year’s 913,500 tons, Sartain said. Xstrata fell 1.3 percent to 1,491.5 pence in London trading at 11:11 a.m. New York time.
Xstrata’s Agua Rica and El Pachon projects in Argentina could deliver 600,000 metric tons of copper by 2016 through an investment of more than $6 billion, Sartain said.
Copper concentrate is an intermediate product obtained from processing ore that is sold to smelters.
Development of the Antapaccay and Las Bambas projects in Peru are on schedule, Sartain said.
To contact the reporter on this story: Matt Craze in Santiago at firstname.lastname@example.org
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