Largest copper producer Codelco bullish on China demand
World copper consumption is expected to grow 5.4 per cent this year, led by China which is expected to buy nearly 40 per cent of global output, industry experts told the World Copper Conference on Wednesday.
Jose Pablo Arellano, chief executive of Codelco, the Chilean state-owned firm which is the world's leading producer of copper, said the rebound this year from a deep decline in 2009 is being driven mainly by the Chinese market and other Asian economies.
"Because of the tremendous potential of the Chinese consumer, there are good prospects for future demand for copper," he told a conference.
"Chinese demand is still strong after robust growth in 2009 and in the coming years we see a significant increase in copper demand in emerging Asia."
Arellano said emerging countries in Asia "are going through a stage of development which is very intensive in the use of copper for construction, energy infrastructure development and industrial activity, and need more copper than other developed countries."
Arellano said his estimate for 2010 growth in copper was 5.4 per cent. Because of rising demand, the company has announced plans to invest US$15 billion over the next five years to expand production in Chile, which already accounts for 33 per cent of global output.
Leonardo Suarez, chief economist at the Chilean brokerage LarrainVial, noted that while demand for copper fell 29 per cent in the world in 2009 due to an unprecedented economic slump, Chinese demand rose 38 per cent.
"China in 2009 accounted for 36 per cent of global consumption," he said. "In 2010 China will consume seven million tonnes of a total of 18 million, almost 40 per cent of the world total".
Suarez sees problems on the supply side, because many copper mines are old and in need of more expensive extraction methods.
"In addition, many new projects are in countries with a high degree of instability," he said.
Michael Jansen, an analyst with JP Morgan Securities, said copper prices are high enough to maintain production.
The price of copper has been hovering around US$3.5 per pound, its highest level in 20 months.
A more sombre view may be that copper is “vulnerable” if China slows
purchases, said the head of Anglo American Plc’s copper business.
Anglo is the sixth largest copper producer
The world’s biggest copper producers are Freeport McMoRan, BHP Billiton Ltd (ASX:BHP), Xstrata and Rio Tinto (ASX: RIO).
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