Bulls vs bears: copper

Materials World magazine
3 Jun 2014

Industry figures considered the future of copper at a Bulls and Bears debate in London, hosted by Women in Mining, the Association of Mining Analysts and MinSouth. Rhiannon Garth Jones reports.

Copper has traditionally served as a bellwether commodity for the market, as Chris Welch, Chair of the debate, pointed out in his welcome address. However, speakers and audience members alike noted that its hold on that position could change in the near future, except perhaps for China’s economy. Olivia Ker said she believed copper was no longer as significant as it had been when the USA was industrialising, while Paul Dewison pointed out that copper’s wide distribution meant that it retained its importance, but conceded that it was no longer the guide it once was. In the opening remarks, both Bears focused on consumption, arguing that the current figures were ill thought-out and observing that scrap metal numbers varied widely from year to year, making accurate predictions difficult. The Bulls, meanwhile, focused on production, reasoning that the failure to find a tier-one mine in the last decade and the increasing cost of water in both capital and operational expenditure would push up prices after 2014.

Both sides emphasised the role of China in the future of the market, currently responsible for 40% of consumption. Ker suggested that China was concerned about supply, highlighting the recent purchase of Las Bambas, the Peruvian copper mine, by a Chinese consortium in the wake of the Kennecott disaster. Dewison acknowledged that China accounts for much of the volatility in the current market, but pointed out that the key electrical products using copper (electric cables
and air conditioning units) were starting to switch to aluminium, and hopes that growth would continue on the same scale were too optimistic. It was also mentioned that China could start to focus more on its carbon footprint, which would reduce its consumption of copper. However, in contrast to the focus on China, an audience member pointed out that growth in India, Brazil, Turkey and across Africa would keep demand for infrastructure and white goods high.

The recent spate of banks, such as JP Morgan and Barclays, reducing or removing their commodities investments provoked questions about the impact of investment on prices. All the speakers agreed that over the past decade, investment had made a serious impression on prices, although both Bruce Always and Ker agreed that the effect had been much more severe on gold and silver. Robin Bhar expressed a concern that the latest regulations might create
more problems than they solved, and Ker remarked that they might introduce some of the one million tonnes of copper currently tied up in deals back into the market, lowering prices in the short term. All speakers cautioned that an allowance ought to be made for market disruption, considering the strikes that have plagued the industry over the past few years, such as the current one at South Africa’s Marikana mine. It was a moment of rare agreement, however, in a heated debate.

Who’s who?
Chris Welch, Association of Mining Analysts – Chair

Olivia Ker – Blackrock
Bruce Always – Thomson Reuters

Paul Dewison – SNL
Robin Bhar – Société Générale

Did you know?
Mine depreciation for the coming year is predicted to be 1% which equates to 100,000 tonnes