Summit News

Cesco sees '09 copper at $1.50-$1.80/lb

SANTIAGO (Reuters) - Global copper prices will trade between $1.50 and $1.80 per pound in 2009, underpinned by buying from top consumer China as it seeks to bolster domestic industrial growth, industry think-tank CESCO said on Tuesday.

Speaking to the Reuters Global Mining and Steel Summit, CESCO executive director Juan Carlos Guajardo said prices would also be supported by lower production in major mining centers like Chile.

Guajardo said CESCO estimates copper output in Chile, the world’s No. 1 producer of the red metal, will fall in 2009 to some 5.3 million tonnes from 5.33 million tonnes last year.

CESCO is a global copper industry think-tank whose members include the world’s largest mining companies. The group hosts the annual CESCO Week, held in the first week of April this year, which groups leaders from the global mining industry.

Guajardo said Chile’s copper output would be hit as producers adapt mine plans and go after easier-to-reach, typically lower-grade ore, and as small miners retire their shovels until the market recovers.

Global copper futures traded at about $1.68 per pound on Tuesday. That’s higher than lows near $1.20 in December, but still 60 percent lower than record highs over $4 in July last year.

Prices for the metal crashed as the international economic crisis deepened, sapping demand in major consumers like the United States and Europe and to a lesser degree in Asia.

Guajardo said that while the economic crisis was far from over, copper prices would resist it more than other commodities, thanks in large part to Chinese demand and as global output slowed.

“We are watching to see if China manages to reorient its export economy toward the domestic market, which will be a determining factor for raw materials to decouple somewhat from the global economy,” Guajardo said.

“If China is successful at this, raw materials will go to higher levels.”

China is moving to control more of the metals it consumes, looking for opportunities amid the economic crisis that has pulverized the balance sheets of some giant miners.

Chinese state-owned Chinalco is currently in a $19.5 billion bid to buy $12.3 billion in asset stakes and $7.2 billion in convertible notes in Australia's Rio Tinto RIO.AXRIO.L.

Also in the works are Minmetals' $1.7 billion rescue bid for OZ Minerals Ltd OZL.AX and Hunan Valin Iron and Steel Group's $768 million plan to buy a 16.5 percent stake in iron ore miner Fortescue FMG.AX.

“I think there is a new dynamic developing where a gap is opening between your traditional (mining) companies and the Chinese and Asian companies, including the Japanese as well,” said Guajardo.

“I think companies that have Chinese capital will maintain higher growth rates.”

Reporting by Pav Jordan; Editing by Marguerita Choy