By Steve Fiscor, Editor-in-Chief
All of the mined commodities listed on the E&MJ Price Index showed positive improvement over last month. Copper posted one of the largest gains. By the end of March, copper prices reached $7,786/metric ton (mt) or $3.54/lb, a 10.5% improvement over last month’s $7,046/mt ($3.20/lb). One year ago, copper prices stood at $3,946/mt or $1.79/lb.
None of the Chilean copper mines was affected by the tragic earthquake and tsunamis that struck Chile last month. However, the newly elected Chilean President Sebastian Pinera announced funds that had previously been set aside for Codelco, the world’s largest copper producer, will be used to provide relief from the damage caused by the earthquake. It remains unclear what impact this decision will have on capital spending for the company.
Despite a copper price that is currently 45% above the 2009 average price, producers have a limited ability to increase capacity over the near-term. Freeport-McMoRan Copper & Gold expects 2010 copper sales to drop to 3.8 billion lb from 4.1 billion lb in 2009. Aside from the Tenke Fugurume operation in the DRC where sales are expected to increase to 240 million lb from 130 million lb in 2009, Freeport said sales would decline in North America, South America, and at Grasberg in Indonesia. Production at the Chuquicamata mine, Codelco’s largest operation, is expected to drop by one-third over the next three years due to a planned reduction of ore mining and processing capacity at the site.
Copper stockpiles in China have reportedly reached a seven-year high. Chinese copper imports increased to more than 322,000 mt in February, a 22% increase of more than 292,000 mt it imported in January. As of the end of February 2010, copper stocks held at the major metal exchanges (LME, COMEX, SHFE) totaled 794,354 mt, an increase of 106,663 mt from stocks held at the end of December 2009.
According to the International Copper Study Group (ICSG), the refined copper market in 2009 remained in surplus of about 365,000 mt, an increase of about 140,000 mt from 2008. World copper usage remained unchanged from 2008 at 18 million mt. Chinese apparent usage, which accounted for 40% of world usage in 2009, grew by almost 2 million mt (38%) and offset a 16% decline in the rest of the world. World mine production in 2009 increased by around 205,000 mt (1.3%) to 15.7 million mt; concentrate production remained practically unchanged at 12.47 million mt (0.3%) while SX-EW rose by around 172,000 mt (5.6%) to 3.26 million mt. Total world refined production increased by 120,000 mt (0.65%) in 2009 compared with 2008: primary production was up by 0.4% and secondary production (from scrap) was up by 1.8%.
Metal traders are speculating that the Chinese copper buyers have increased holdings in anticipation of a general improvement in the economy worldwide, which will in turn increase demand. Most are predicting strong copper prices from $7,800/mt to as high as $8,400/mt through 2011 and some even see the market moving into deficit this year.