The Wall Street Journal reports,"the world’s strongest earthquake in a year and hundreds of aftershocks rattled the copper-rich Atacama Desert last week, forcing almost a million people to seek refuge from tsunamis. The copper market barely reacted".
The metal is down 0.7 percent in Londonsince Anglo American Plc to Antofagasta Plc temporarily halted some operations after an 8.2-magnitude temblor struck on the evening of April 1. Investors’ indifference is explained by surging global output at a time of waning Chinese demand growth.
As tremors continue to shake northern mines, it will be the prospect of the biggest global glut since the so-called super-cycle began -- and how miners are reacting by shelving expansions and shoring up balance sheets -- that dominate discussion at the industry’s annual get-together in Santiago this week. Chile, the top producer, is opening three mines in a year, more than it has started in the past decade.
“Demand is not going to grow by the same margin, which is going to generate a significant surplus,” Alvaro Merino, head of research at Chilean mining society Sonami, said in an April 4 interview. “You are really going to see this increase in the second half of this year.”
New mines will help increase global production by 4.7 percent in 2014 and 7.3 percent next year, according to the Lisbon-based International Copper Study Group. That compares with an estimated 3.2 percent demand growth and 3.6 percent in 2015.
CRU estimates a surplus this year of 140,000 tons, Vanessa Davidson, copper group manager at the London-based metals researcher, said in a March 24 interview. That’s almost four times bigger than previously estimated. The excess will widen to about 250,000 tons in 2015 before exceeding 400,000 tons a year later, Davidson said at the time.
Copper for delivery in three months declined 10 percent this year to $6,612.50 a ton on the London Metal Exchange. Prices reached the lowest level since 2010 last month amid concern about slumping demand in China and a release of metal held as finance collateral.
Copper’s price slump has led to companies shelving projects that might bring the shortages of the past decade back as early as 2017, according to Sonami.
About 40 percent of the $110 billion of projects under consideration in Chile are being revised or have been postponed, Sonami’s Merino said. Also, much of the investment needed is to replace declining output from aging mines. Mining companies spent $54 billion between 2004 and 2012 without raising output, according to Sonami.
