Rio Tinto Group, the world’s third-largest mining company, said it expects copper demand in China and other emerging markets to grow faster than output, prompting a global deficit for the metal used in housing and appliances.
The shortage this year may rise to between 400,000 metric tons and 500,000 tons, Andrew Harding, head of Rio Tinto’s copper business said today in an interview in Santiago.
Rio predicts the shortage may exceed the 400,000-ton deficit forecast of 24 analysts and traders surveyed by Bloomberg News. Copper rose the most in two weeks today as Freeport McMoRan Copper & Gold Inc., the world’s largest publicly traded producer, predicted Chinese demand will gain even as the country takes measures to stem quickening inflation.
“You’ve got this very strong demand in the long term being driven by China,” Harding said. “And the supply side is not going to respond with the speed to match that.
Copper futures for May delivery gained 10.6 cents, or 2.5 percent, to $4.37 a pound at 3:30 p.m. on the Comex in New York, heading for the biggest gain for a most-active contract since March 23.
“In the long run, we are very confident about the outlook for copper demand in China,” Richard Adkerson, the chief executive officer of Phoenix-based Freeport, said yesterday after news that the People’s Bank of China boosted its benchmark one-year lending rate by a quarter point to 6.31 percent.
Copper output at BHP Billiton Ltd.’s Escondida copper mine, the world’s largest, will fall between 5 and 10 percent this year because of declining ore quality, according to a Sept. 27 report. Rio, based in London, owns 30 percent of Escondida, located in Chile’s Atacama Desert.
Adkerson said the company is evaluating extending the life of the open pit mine at Grasberg, Indonesia, beyond 2016. The company plans to mine underground ore at the site after that, he said. Grasberg is the world’s second-largest copper mine.
Output at Anglo American Plc and Xstrata Plc’s Collahuasi mine in northern Chile, the world’s third-largest, will fall in the first quarter because heavy rains flooded the site in January and February, John MacKenzie, who runs Anglo’s copper business, said in an April 1 interview.
Production from the Chuquicamata mine, owned by Chilean state producer Codelco, is expected to fall from 2014 as copper oxide ores are exhausted, Chief Executive Officer Diego Hernandez also said yesterday in Santiago.
The supply shortage might be greater than experts estimate as the world’s biggest mines start to experience technical problems because of their age, said Juan Villarzu, who ran Codelco, the world’s biggest producer of the metal, between 2000 and 2006. The world needs an additional 800,000 metric tons a year of new supply to meet emerging market demand, he said.
“You are going to have a bigger supply gap than people anticipated,” he said.