Codelco, the biggest copper producer, will reduce cathode shipments to China this year as the nation’s needs shift to concentrate imports.
Codelco, based in Santiago, will ship about 350,000 metric tons of copper cathode to China this year, “a few thousand tons” less than last year, Rodrigo Toro, corporate sales vice president, said in an interview in Madrid today.
China is moving its import needs from refined metal to copper concentrate after domestic production surged to account for 73 percent of the nation’s primary usage, according to a Citigroup Inc. report dated March 4. Copper is used in electrical wiring and pipes. China’s priority will be to produce its own refined copper, Toro said.
“They will import copper in the form of concentrate as much as they can,” Toro said at the Metal Bulletin copper conference. “The smelting and refining capacity in China is not able to cope with all the metal requests.”
Copper prices have dropped 3 percent this year in London on speculation supplies will exceed demand even with growth in China.
China will still import 2 million tons to 2.5 million tons of refined copper this year, Toro said. It took in 3.4 million tons of refined metal in 2012, up 20 percent from a year earlier, customs data show. Last year’s imports were “much more” than the country needed and the copper ended up in bonded warehouses, Toro said. The country may have accumulated 700,000 tons to 800,000 tons of copper in bonded warehouses and the stockpiles need to decline before imports pick up, he said.
“They are consuming that stock, they are feeding their industry with that stock and so they are importing less,” he said. “Western cathode production ends up going into London Metal Exchange warehouses in Europe, the U.S. and Asia.”
Copper stockpiles in warehouses monitored by Comex, LME and Shanghai Futures Exchange will grow “marginally” this year, Toro said. Inventories in warehouse monitored by the LME surged 48 percent this year to the highest level since Oct. 5, 2011, while those in Shanghai are at the highest in almost a year.
Demand in China will grow at an annual pace of 4 percent to 5 percent in the next five years, while consumption in other emerging economies in Asia, Latin America and Africa will expand by 3 percent to 4 percent, according to Toro. Prices will need to stay high enough to encourage producers to add new mines, he said.
Global copper demand growth will accelerate to 4.2 percent this year after expanding 1.1 percent in 2012, the smallest increase in three years, Morgan Stanley estimates. Usage in China will grow 8.4 percent this year, the fastest pace since 2009, after hovering around 5 percent for two years, the bank estimated in a Jan. 24 report.
“The world is not in a recession and is growing in a healthy way,” Toro said. “China last year had an unexpected stagnation of copper consumption. We do not expect this to be the case now.”
About 90 percent of Codelco’s cathode sales go to consumers as part of annual contracts, while the rest is sold on the spot market, Toro said.
“The situation in Europe is not good but that doesn’t mean the situation in Europe is a disaster,” he said.
Increasing costs and environmental risks pose a challenge to new mining projects, Toro said. An expansion of Codelco’s Andina mine in central Chile is a “very complex project” and final approvals will probably be granted “towards the end of the year but most probably next year,” he said.
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