Codelco Output May Slip for Fourth Year on Strike, Older Mines
By Heather Walsh
July 24 (Bloomberg) -- Codelco, the world's largest copper producer, said output may decline for a fourth year because of labor unrest and aging mines, worsening a shortfall in global supplies that had sent prices to a record.
Production may drop 4.2 percent to about 1.60 million metric tons this year from 1.67 million tons in 2007, Codelco's Chief Executive Officer Jose Pablo Arellano said in an interview in Santiago, Chile. Output may climb ``a bit'' in 2009, and won't return to 2007 levels until 2010, he said.
Codelco, Freeport-McMoRan Copper & Gold Inc. and other mining companies have failed to keep up with ``stronger than expected'' demand for copper, Arellano said. Global supplies of the metal are ``below forecast,'' which may push prices back to the record $4.2605 a pound reached in May, Arellano said.
``We are all struggling, Freeport included,'' Arellano said in a room decorated with green-flecked rocks from Codelco's copper mines. ``We are investing at record levels, but everything is taking more time, for all producers.''
Copper futures for September delivery lost 3.3 cents, or 0.9 percent, to $3.6575 a pound yesterday on the Comex division of the New York Mercantile Exchange. Copper gained 20 percent this year and has almost tripled in four years.
Phoenix-based Freeport is the world's largest publicly traded copper producer. Strikes at mines operated by companies including Southern Copper Corp., have trimmed output in Latin America in the past year.
Chinese Demand
Demand for copper in emerging markets, such as China and India, is buoying prices, Arellano said. Speculation has added about 22 percent to the price, which otherwise would be about $3 a pound, he said.
Emerging markets ``are going through a stage in the development process that is very intensive in metals like copper,'' Arellano, 56, said.
China's economy has grown by more than 10 percent annually in the past five years, fueling consumption of metals as it builds more apartments, cars and factories.
Rising production of copper as companies expand may lead supply worldwide to equal demand next year, Arellano said.
Codelco has uncovered a new copper deposit in northern Chile, Arellano said. Codelco already holds about 17 percent of the world's copper reserves. Codelco also may consider scouting for the metal outside of Latin America, possibly with China Minmetals Corp., Arellano said.
China Minmetals is the country's largest metals-trading company.
Codelco is seeking to increase production of molybdenum, which is used to toughen steel, and may start producing rhenium, used in aircraft and turbine engines, after prices surged, he said. Rhenium is found in ore produced at the company's mines.
Molybdenum has jumped more than fivefold since early 2004 as demand for corrosion-resistant steel grows.
To contact the reporter on this story: Heather Walsh in Santiago at hlwalsh@bloomberg.net.
Last Updated: July 24, 2008 00:05 EDT |
