BHP Billiton sees copper market turn to surplus in H2 2005 UPDATE
Wednesday, October 13, 2004 2:00:23 PM
afxpress.com
(Adds 1 bln usd investment for Spence project; other expansion plans)
LONDON (AFX) - BHP Billiton PLC, the Anglo-Australian miner, expects global copper supply to exceed demand in the second half of 2005 as more production comes on stream
However, in the first half, demand will continue to outstrip supply, thus keeping the market in deficit for the year as a whole
"Based on our assessment of the market, we may see it move to a surplus in the second half of 2005. But it will still be in deficit for the whole year," John Crofts, marketing director of BHP's base metals business, said in an analysts' briefing. That should help sustain the prevailing "high price environment," going forward, he added
This year, the supply shortfall will still be "considerable," driven largely by the China's "ravenous" need for copper, he said
Copper prices have soared over the past months, reaching their highs in over a decade this week, as the market feeds China's insatiable demand for the metal. China has now surpassed the US as the biggest market for copper, consuming three million tonnes so far this year, or nearly 20 pct of the global production of 16 mln tonnes
China will remain a key growth driver for the market in the coming years, despite Beijing's efforts to ease the rapidly expanding domestic economy
Chinese demand is holding up well and there has been no signs that demand is abating, with the Chinese market seen still growing "in excess of 10 pct" going forward, Croft said
That will mainly fuel the steady growth in the global market, he said, adding that he considers the industry's forecast of an annual 3.5 pct growth in the world demand "realistic." Despite the expected excess supply next year, BHP is not changing its expansion plans aimed at bringing annual copper production to 1.4 mln tonnes by 2008
BHP cut output during the early years of 2000 to ease the dramatic fall in copper prices brought about by the supply surplus
"Demand is quite firm... so cutting production is very, very far (from BHP's plans). We're not worried about that today," said Diego Fernandez, president of the base metals' division
In 2004, the group's production is on track to achieve its programmed 1 mln tonnes, he added
Glenn Kellow, the division's chief financial officer, said costs are well under control despite pressures brought about by soaring oil prices and rising energy prices in Chile
"We don't expect cost increases bigger than 10 pct," he said
Chile hosts BHP's largest mine, Escondida, in which it holds a 57.5 pct stake
BHP is continuing to boost Escondida output, which has grown to about 1.1-1.2 mln tonnes currently from about 800,000 tonnes last year. It is invest 400 mln usd in Escondida in 2004-05 to expand the site's ore processing capacity by 220,000 tonnes per day. A further 800 mln usd will be spent between 2005 and 2006 at Escondida's sulphide leach facilities
Also in Chile, BHP will invest 1 bln usd in the Spence project, a greenfield development at Sierra Gorda in the northern part of the country
Fernandez said Spence could produce 200,000 tonnes of copper cathodes per annum
BHP hopes to get the approval for the project in the fourth quarter of 2004, he added. The first cathode from Spence, which holds estimated reserves of 370 mln tonnes, is expected in the fourth quarter of 2006, he said
At Tintaya, in Peru, BHP expects a "slight" shortfall in sulphide production in 2005. Oxide production however will "exceed" plan, said Ian Ashby, the chief operating officer
At Antamina, also in Peru, production is on course to achieve its target of "in excess of 120,000 tonnes" in 2005, he said
Cerro Colorado, also in Chile, would experience a drop in output in 2005, before improving again in the following years, Ashby said
"Mine plan (for Cerro Colorado) sees production through 2013," he said
BHP owns 100 pct of Cerro Colorado, 99.9 pct of Tintaya, and 33.75 pct of Antamina sites |
