Chinalco Copper Output Cuts Set To Help Trim Global Surplus

Chinalco Mining Corp. (3668) International said copper output from its mine in Peru may be as much as 37 percent lower than expected next year because of limited power supplies, helping cut the projected global surplus.

Production from the $2.2 billion Toromocho mine may be 120,000 to 150,000 metric tons next year, compared with the previous forecast of 190,498 metric tons, Chinalco Mining, a unit of China’s biggest aluminum producer, said today. Long-term production won’t be affected, it said.

A cut of 70,498 tons from Chinalco Mining would represent almost one-fifth of the projected surplus next year and could help boost copper prices in London, which have dropped 9.8 percent this year. Australia’s Oz Minerals Ltd. fell the most in more than 20 years in Sydney today as it forecast lower-than expected copper production.

“It’s illustrative of the ongoing supply challenges that face the copper market,” Andrew Driscoll, the head of resources research at CLSA Ltd. in Hong Kong. “We do expect supply to grow less than some of the more optimistic estimates out there.”

Chinalco Mining fell 0.9 percent to HK$1.10 in Hong Kong as of 11:43 a.m. local time, compared with the 0.6 percent decline in the benchmark Hang Seng index. Copper for three-month delivery slid 0.1 percent to $7,152 a ton.

Production Disruptions

Production disruptions will curb a forecast global surplus, which is estimated to be 167,000 tons this year and widen to 408,000 tons in 2014, according to Bloomberg Industries. Operators from Rio Tinto Group to Freeport McMoRan Copper & Gold Inc., the world’s largest publicly traded producer, have been beset by problems including power outages and declining grades.

CLSA estimates a surplus of 114,000 tons in 2014 and 87,000 tons in 2015, according to Driscoll. The glut will reach a 13-year high of 272,000 tons next year, according to data from Barclays Plc and the International Copper Study Group.

Producers will need to add 2 million tons of annual capacity a year from 2012 to 2025 to maintain current output, Rio Tinto’s chief executive officer of the copper unit, Jean-Sebastien Jacques said on Dec. 4. The supply gap could reach 9 million metric tons of annual capacity by 2025, he said.

The underground expansion of Oyu Tolgoi, the copper mine in Mongolia operated by a Rio Tinto unit, has been delayed discussions with the government over funding and other issues..

Freeport would have to cut output at its Grasberg mine, the second-largest in the world, to 30 percent to 40 percent of the maximum if Indonesia bans shipment of concentrates, said Rozik B. Soetjipto, president director at PT Freeport Indonesia said Dec. 6

To contact the reporter on this story: Michelle Yun in Hong Kong at myun11@bloomberg.net

To contact the editor responsible for this story: Andrew Hobbs at ahobbs4@bloomberg.net

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