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From 1998 to 2003, the average market price for copper was just US$1,650 a tonne. During this long period of low market value, many mining companies either collapsed, or shut down their copper operations. Exploration for the metal was minimal. However, following the Asian infrastructure boom - which currently consumes 50 per cent of global copper supplies - demand for copper and other base metals has soared.
In mid-2006, copper prices reached an unprecedented US$9000 a tonne. Since then however, prices have dropped by almost 20 per cent.
Managing Director of Tri Origin Minerals, Bruce Robertson, says:
“I think what we’ve seen is a bit of negative sentiment in the US in the housing sector, and that’s certainly had an impact, on an incremental basis, on metal demand. I think in the next few years people are forecasting that the supply/demand influence for metals may balance out a bit more than they have in the last few years.”
Marengo Mining’s Managing Director, Les Emery, prefers to make his predictions based on his contact with the end consumers:
“You know it’s an interesting world, because the analysts have this view that there’s going to be a glut of copper, too many of us in production at once. But then when you go back to the end users; the smelters and the end consumers; they tell you a different story, and I guess they are the ones who I value more. They are the ones that are saying, well we need the metal, we can’t see it coming from the current suppliers, and a number of those mines will close, and therefore we need new people coming on board.”
With the population of China alone standing at more than 1.3 billion, and with the economic growth of the Asian giant predicted to continue to rise by up to 10 per cent this year, it’s easy to see why confidence within the copper industry remains bullish, despite the recent downturn in prices. Les Emery’s figures make for a compelling argument:
“I guess if you look back in a Western developed nation, and the figures are something in the order of copper you need per head of population; about 20 pounds of copper per annum consumed. In Asia and particularly China, the consumption rate is about 2 pounds.
"So, there’s an 18 pound differential to be made up. And that’s made up because people want running water, they want telephones, they want motor vehicles. So you've got a major part of the world's population who want to have the lifestyle of the developed Western nations."
Following the hike in copper prices of recent years, some analysts predicted that the soaring prices would bring a glut of new copper producers online. However with new copper mines taking anything between five and 15 years to bring into production, this seems unlikely to be the case in the imminent future.
Tri Origin’s Bruce Robertson agrees:
“It takes time for people to invest in exploration, as well as the capital works actually required to actually build new mines or operations, or even expand existing operations. So in that sense we find that there is a time lag between increased demand and increased supply.”
So, what of the future for Australia’s copper producers?
Les Emery says:
“If you look at the copper price, you know around US$3.20, $3.30 a pound, and sure it’s been up around the $3.80, $3.90 – that’s a long way from where it was. And most producers are producing copper at well under a dollar a pound, so the margins are still very, very good. I mean most of us have done our studies at much lower prices – we’ve done our first pre-feasibility at US$1.50 a pound, so we’ve taken the worst case scenario.”
Bruce Robertson too, believes the industry’s future will be a bright one:
“I’m a super-cycle supporter and I believe that we will have our ups and downs in the short term, but over the longer term we will continue to see sustained high metal prices, principally because of the increased demand out of the BRIC [Brazil, Russia, India, China] economies, but also as a function of restricted supply, particularly in zinc but also to a degree in copper, and that it will take time for new copper projects to come on board. So I think the future bodes well for base metal projects, particularly for zinc and copper.”
In mid-2006, copper prices reached an unprecedented US$9000 a tonne. Since then however, prices have dropped by almost 20 per cent.
Managing Director of Tri Origin Minerals, Bruce Robertson, says:
“I think what we’ve seen is a bit of negative sentiment in the US in the housing sector, and that’s certainly had an impact, on an incremental basis, on metal demand. I think in the next few years people are forecasting that the supply/demand influence for metals may balance out a bit more than they have in the last few years.”
Marengo Mining’s Managing Director, Les Emery, prefers to make his predictions based on his contact with the end consumers:
“You know it’s an interesting world, because the analysts have this view that there’s going to be a glut of copper, too many of us in production at once. But then when you go back to the end users; the smelters and the end consumers; they tell you a different story, and I guess they are the ones who I value more. They are the ones that are saying, well we need the metal, we can’t see it coming from the current suppliers, and a number of those mines will close, and therefore we need new people coming on board.”
With the population of China alone standing at more than 1.3 billion, and with the economic growth of the Asian giant predicted to continue to rise by up to 10 per cent this year, it’s easy to see why confidence within the copper industry remains bullish, despite the recent downturn in prices. Les Emery’s figures make for a compelling argument:
“I guess if you look back in a Western developed nation, and the figures are something in the order of copper you need per head of population; about 20 pounds of copper per annum consumed. In Asia and particularly China, the consumption rate is about 2 pounds.
"So, there’s an 18 pound differential to be made up. And that’s made up because people want running water, they want telephones, they want motor vehicles. So you've got a major part of the world's population who want to have the lifestyle of the developed Western nations."
Following the hike in copper prices of recent years, some analysts predicted that the soaring prices would bring a glut of new copper producers online. However with new copper mines taking anything between five and 15 years to bring into production, this seems unlikely to be the case in the imminent future.
Tri Origin’s Bruce Robertson agrees:
“It takes time for people to invest in exploration, as well as the capital works actually required to actually build new mines or operations, or even expand existing operations. So in that sense we find that there is a time lag between increased demand and increased supply.”
So, what of the future for Australia’s copper producers?
Les Emery says:
“If you look at the copper price, you know around US$3.20, $3.30 a pound, and sure it’s been up around the $3.80, $3.90 – that’s a long way from where it was. And most producers are producing copper at well under a dollar a pound, so the margins are still very, very good. I mean most of us have done our studies at much lower prices – we’ve done our first pre-feasibility at US$1.50 a pound, so we’ve taken the worst case scenario.”
Bruce Robertson too, believes the industry’s future will be a bright one:
“I’m a super-cycle supporter and I believe that we will have our ups and downs in the short term, but over the longer term we will continue to see sustained high metal prices, principally because of the increased demand out of the BRIC [Brazil, Russia, India, China] economies, but also as a function of restricted supply, particularly in zinc but also to a degree in copper, and that it will take time for new copper projects to come on board. So I think the future bodes well for base metal projects, particularly for zinc and copper.”
