Freeport Says Copper Cuts Not Enough to End Surplus in 2016

  • A new wave of mining expansions means demand is lagging output
  • Market set to shift to deficit from next year, Targhetta says

Copper-output cuts spurred by lower prices aren’t enough to end a surplus this year and demand won’t catch up with supply until 2017, according to a senior official at Freeport-McMoRan Inc., the largest publicly traded producer of the metal.

Around 700,000 metric tons of supply will have been removed in about the year through mid-2016 as prices sank to a six-year low, according to Javier Targhetta, a senior vice president of marketing and sales. Still, new supplies from mines added this year mean a glut won’t be completely wiped out in 2016, he said in an interview Tuesday.

“This year there is a new wave of copper expansion being started,” said Targhetta, who was attending Metal Bulletin’s International Copper Conference in Lisbon.

Copper tumbled in the past three years as China, the biggest consumer, headed for its slowest economic growth in a generation following years of investment in output by miners. Production outpaced demand by about 147,000 tons in 2015, the biggest surplus since 2009, according to the World Bureau of Metal Statistics.

Source: World Bureau of Metal Statistics

Output in Peru surged 40 percent in January from a year earlier as Freeport’s Cerro Verde operation boosted volumes and mines built by Minera Chinalco Peru SA and Hudbay Minerals Inc. completed ramp-ups, the nation’s mines ministry said last week.

Copper demand will rise slightly more than 2 percent a year on average through 2020, probably catching up with production in 2017, Targhetta said. The deficit will then widen as no new mines come on stream, he said, adding that a 500,000-ton deficit by 2020 wouldn’t be surprising.

"Long term I am very positive," Targhetta said. "I don’t see any new projects."

Copper for delivery in three months rose 1 percent to $4,917.50 a ton on the London Metal Exchange on Wednesday. The metal, up 4.5 percent this year, last week capped its biggest weekly gain since December 2011 after touching a six-year low in January.

While the rally last week didn’t reflect a change in copper’s fundamentals, the metal’s earlier slump also wasn’t justified by the industry backdrop, and was exacerbated by falling oil prices and investors pulling out of commodity investments, Targhetta said.

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