Pan Pacific sees copper prices continuing to rise in 2018

TOKYO (Reuters) - Pan Pacific Copper (PPC), Japan’s biggest copper smelter, expects copper prices to rise more than a quarter over the next two years as global demand continues to grow and outpaces supply, its senior executive said on Monday.

Pan Pacific expects copper prices to average $7,280 a tonne in 2018 and $7,720 a tonne in 2019, against $6,100 a tonne this year, executive officer Satoshi Arai, told a news conference.

“Consumption of refined copper is forecast to increase by 2 percent a year between 2016 and 2020, backed by solid infrastructure demand in developing countries and fresh demand from electric vehicles (EVs) and renewable energy,” Arai said.

The next two years, though, PPC said refined copper supply will climb only 1.3 percent in 2018 and 1.6 percent in 2019.

“The global refined copper market will likely face a shortage of 216,000 tonnes next year, up from 51,000 tonnes this year, which will help shore up copper prices further,” he said.

Copper prices have gained nearly 30 percent this year on a positive outlook for the global economy. Miners have also faced higher development costs due to lower copper content in ores, the far-flung locations of mines and tighter environmental regulations.

To enhance mine development, copper prices need to be at least $3.50 per pound, or $7,716 per tonne, Arai said.

Three-month copper on the London Metal Exchange closed at $7,124 a tonne on Friday.

To meet growing copper demand from EVs and renewable energy, as well as infrastructure demand, PPC said 4.6 million tonnes of copper ore will need to come from new mines by 2030.

Growth in EVs will boost annual demand in global refined copper by an additional 1.6 million tonnes by 2027 from this year, as it takes 60-90 kg of copper to make each new EV, as against 23 kg for a gasoline-powered car.

Electric vehicles use a substantial amount of copper in their batteries and in the windings and copper rotors used in electric motors. A single car can have up to six kilometres of copper wiring, according to the International Copper Association (ICA).

Global miners and smelters are in talks for next year’s treatment and refining charges (TC/RCs). Miners pay the TC/RCs to smelters to process their ore and the level the sides agree to pay plays a large role in the profitability of the miners and the smelters.

PPC thinks processing charges should remain unchanged from this year’s $92.50 per tonne and 9.2 cents per pound because the demand and supply balance in global copper ore markets will be little changed in 2018 from 2017, Arai said.

Reporting by Yuka Obayashi; Editing by Tom Hogue