Copper has played an integral role in human civilization, beginning with the copper tools that ushered us out of the Stone Age and then moving forward with the discovery of bronze, the copper-tin alloy that gave us the Bronze Age.
Highly malleable, copper is resistant to corrosion, efficient at conducting heat and electricity, and excellent at alloying with other metals, including
zinc (to form brass), tin (to form bronze) and nickel. Copper is also highly recyclable.
Industrial innovation has led to the introduction of copper in an impressive number of domestic, industrial and high-technology applications and products
such as electronics, electrical systems, telecommunications systems, heating and cooling systems, building construction, plumbing, transportation,
industrial machinery and equipment, and household appliances.
Copper’s fundamental place in basic construction and core infrastructure has made it a key indicator of economic growth. When economies grow, nations
build. The 2008 economic recession hammered the construction industry, which sent copper prices into a tailspin. As global demand plummeted, mining
projects around the world were put on hold and production scaled back. However, demand for copper has returned with the global economic recovery, so much
so that a supply deficit reached 286,000 tonnes in 2010.
“We are in a position of deficit,” says Neil Buxton, managing director at GFMS, a metals research consultancy. “This year, we do not expect production to
grow faster than consumption. Our numbers are suggesting that, if anything, the deficit will increase. Last year was exceptional because of the recovery,
and we see healthy demand growth for the next couple of years.” Forecasts see this supply crunch continuing, reaching a possible deficit of 444,000 tonnes
in 2011 and stretching into 2012.
Most of the growing demand has come from emerging economies such as China, India and Brazil. China, in particular, has become a major presence, overtaking
the United States in 2002 as the world’s top consumer of copper. From 1999 to 2007, China tripled its annual refined copper consumption and in 2010,
imported 6.47 Mt of copper concentrate, nearly 40 per cent of the global copper demand. This deficit has prices soaring. Copper prices rose 260 per cent
over the past two years, reaching a high of US$10,190 per tonne in February.
Forecasts for copper demand are strong, although the market remains jumpy. Investors and traders are keeping an eye on China which, in an attempt to
contain inflation and cool growth, has begun tightening its monetary policy. Concerns remain about further debt woes in Europe a year after the European
sovereign debt crisis tripped up global recovery in 2010. More recently, the armed conflict in oil-rich Libya has sent oil prices up, stalling the global
economy and suppressing demand for copper.
There are also natural disasters to contend with. The massive earthquake and tsunami that hit Japan in March of this year paralyzed much of the nation’s
business and industry, although analysts predict the coming reconstruction to increase copper demand in the long run.
This demand for copper is encouraging global producers to increase output, and to bring new projects into production. “There is a push to expand a number
of existing mines, although that takes time,” says Michael Chender, CEO of Metals Economics Group. “All projects that were put on hold during the brief
recession for price reasons have been restarted.” There has also been a large increase in exploration. “Copper exploration budgets increased 40 per cent in
2010 over 2009,” says Chender.
However, it will take a while to bring all of this new copper into the market. “There is a strong pipeline of projects and we do see mine production growth
accelerating over the next few years to eventually see the market turn to surplus,” says Buxton. “But our latest forecasts only see this happening in
Andrew Harding, chief executive of Rio Tinto’s copper unit, agrees. “Given the current market fundamentals of strong demand and restricted supply from
declining ore grades, we expect a deficit for 2011, and most likely for 2012,” he says. “We don’t see the deficit easing until significant projects like
Oyu Tolgoi start commercial production.”
Rio Tinto secured management of Oyu Tolgoi, a gold-copper mine in Mongolia, in December 2010. “Oyu Tolgoi will be a top-five copper producer when it
reaches full production,” says Harding. Currently, the project is scheduled to begin commercial production in the first half of 2013.
The first major copper mine to come into production since the recession is Antofagasta Minerals’ Esperanza Mine in Chile, inaugurated in April. Antofagasta
is also expanding its Los Pelambres Mine in Chile, and hopes to double its copper output by 2020.
World copper reserves are currently placed at around 630 Mt, with total land-based world copper resources estimated in excess of three billion tonnes. Much
of this is found in the vast porphyry deposits in the Andean Mountains of South America, a region that produces the lion’s share of the world’s copper.
Chile, the world’s largest producer, is well-positioned. The country contains 150 Mt of reserves, is home to half of the world’s 10 biggest copper mines,
and is responsible for producing 34 per cent of the estimated global output in 2010.