Freeport’s Copper Man of the Year Has a Reality Check for Bulls

  • Higgins says miners need to adjust to China slowdown
  • Copper rises most in three months on Chinese hoarding signals

The copper industry’s latest luminary has a word of caution for bulls celebrating China’s plans to boost its metal stockpiles: the market may be entering a period of oversupply.

More production has come on stream at a time consumption growth in China has slowed significantly, and producers need to adjust to that, said Stephen Higgins, who heads Freeport-McMoRan Sales Company Inc., a division of the largest publicly traded copper miner. He’ll be named co-Copper Man of the Year at The Copper Club annual dinner in New York on Thursday.

“Any time you get these kinds of shifts going on, that presents some challenges to the industry,” Higgins said in an interview. “The challenge is you’ve got a demand curve that’s fairly linear in fashion, albeit it’s slower linear demand growth today than when China was expanding rapidly.”

Copper, which has slumped more than 50 percent from a 2011 peak, rallied the most in three months on Wednesday after people with knowledge of the matter said China plans to boost base-metal stockpiles. RBC Capital Markets projects a surplus of 181,000 tons this year and a move back into deficit in 2018, while Goldman Sachs Group Inc. says the market won’t return to balance until 2020.

Still, demand prospects remain bright given the number of people in the world without access to infrastructure, said Higgins, who opened a China marketing office 15 years ago for Phelps Dodge Corp. before it was acquired by Freeport.

The long-term price outlook is also strengthened by growing logistical, power and water restrictions to developing the new deposits needed to replace aging mines, Higgins said. The other challenge is dealing with regional, local and federal governments.

“This whole license to operate, social responsibility part of mining is growing in importance,” he said.

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