- New venue for copper industry gala reflects mining cutbacks
- Attendees will be about 15 percent lower than last year
For the past decade the annual gathering of copper executives, traders and buyers culminated at a 19th century palatial hippodrome in Chile’s capital for horse races, wine tasting and dinner for as many as 2,000 people.
This year, with a sharp slowdown in Chinese demand bringing metal prices and company budgets crashing back down to earth, the equine flamboyance is gone. Organizer CESCO is opting for a more conventional venue to host a dinner for 1,450 guests, while an exploration forum was canceled altogether.
The industry may be bracing for worse as Goldman Sachs Group Inc. to Barclays Plc forecast further price declines after miners expanded to cater to surging Chinese demand only to see that growth stall, creating a global glut. Optimistic by nature, miners have opted to batten down the hatches by focusing more on cost cuts rather than production cuts, on the view that the market will tighten again in the coming years.
“We are saving in everything we can,” CESCO Chairman Patrick Cussen said in an interview in Santiago Monday. “We have made a big effort to reduce costs and to have a more austere event, which is important to reflect the times.”
The dual CESCO-CRU copper week in Santiago is as good a barometer as any for the health of the industry. And with copper regarded as a bellwether of the global economy, the gathering may provide clues on the outlook for growth in China, the world’s biggest buyer of the metal.
The event and its famous Wednesday night bash began two decades ago and grew to peak at about 2,000 dinner attendees in 2011, when copper prices exceeded $10,000 a metric ton and the industry was squarely focused on expansion and diversification. Today the metal used in plumbing and wiring trades at about $4,770. The number of dinner guests will be about 15 percent lower than last year and the topic of conversation has shifted to streamlining and productivity.
Still, the attendees to this year’s gala dinner won’t exactly be slumming it.
In a country where copper accounts for almost half of exports, President Michelle Bachelet is scheduled to attend this year at the Espacio Riesco convention center on the outskirts of Santiago.
“We won’t be having a big party with fireworks, but it also doesn’t have to be the other way, that everything will be very gloomy and you’ll only be getting bread and water,” Cussen said.
The main difference this year probably will be lower attendance by investors who came into commodities as an asset class, according to Antofagasta Minerals SA Chief Executive Officer Ivan Arriagada.
“Those guys will probably have less participation,” he said in an interview in Santiago on Monday. “But those with a long-term interest in the industry will be here.”
Helping blunt the price rout for miners in places like Chile are weakening local currencies and declines in energy prices thanks to crude’s collapse, along with austerity measures that have allowed companies to keep most of their mines running.
With Chinese demand set to continue growing, albeit at a slower pace, the glut will begin to dissipate, signaling a recovery from about 2018, according to Nelson Pizarro, chief executive of state-owned Codelco, the world’s biggest copper miner.
Cussen, who has more than four decades of experience in the industry, agrees that the downturn will run its course, even if prices won’t get back to the heights of 2011.
“I’ve seen many cycles, and people have the feeling that when the market is down it will be there forever,” he said. “That’s not the case. The only difference is since we had a very good period because of the super cycle, people forget that we have this kind of bad cycle. Two-three years from now we will be again to the positive side of the cycle.”