Chinese Demand may push the Price of Copper up by one-third
A Bloomberg article from earlier this year suggested that Chile, the world’s biggest copper producer, expects prices to increase by about a third over the long term because of rising demand from China, the top consumer.
According to Sergio Hernandez, executive vice president of the Chilean Copper Commission, or Cochilco, Copper may average $6,330 a metric ton after 2018. The metal is used for industrial purposes, architectural uses, electrical and everyday uses.
Hernandez says that China consumes about half of global copper production and that will increase to 58 percent within ten years.
“Production does not have a lot of investment in comparison with demand,” said Hernandez, who forecasts prices will remain around current levels for the rest of the year, rising to an average $4,850 next year. “We have a high level of confidence about the increasing prices.”
Codelco, the world’s biggest copper producer, also sees prices rising toward the end of next year as investment cuts hasten a re-balancing of global supply and demand.
According to Codelco Chairman Oscar Landerretche, the outlook for copper prices has improved since industry executives met in Santiago in April 2016. In a recent interview, Landerretche said “The producers, the real decision makers, are moving in a better direction … There has been a lot of halting or delaying of projects. All the big players have done that.”
This past March, Wood Mackenzie - a global energy, metals and mining research and consultancy group with an international reputation for supplying comprehensive data, written analysis and consultancy advice – released a report that said the Chinese government released the framework for its 5-year plan. It outlines the economic and social development goals for 2016-2020, which will drive China’s copper demand over the period.
A new electrical network – the undergrounding of power and communication cables in new and existing urban areas, the call for 20 million substandard urban home to be redeveloped, as well as a commitment to the development of high-end equipment and new energy vehicles, will buoy demand over the medium term.
A shortfall of the metal should emerge later this decade, according to Rio Tinto Group, while Freeport-McMoRan Inc., the largest publicly traded copper producer, sees the market in deficit as soon as next year. Mining companies are racing to meet a forecast global deficit.
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