Metals Outlook. Global copper mining output likely to increase by 7.8%

Global copper mining production is forecast to increase by 7.8 per cent this year due to a slew of new projects coming online and low base effects due to Covid pandemic lockdowns resulting in lower output last year, according to Fitch Solutions Country Risk and Industry Research (FSCRIR).

In a commentary on “Global Copper Mining Outlook”, FSCRIR said the new projects that go on stream this year would keep production strong the next few years, supported by rising copper prices and demand.

21% rise in prices

Copper prices have gained over 21 per cent this year, though they are off from the record highs seen in May. On the London Metal Exchange, copper's three-month contract ended at $9,405 a tonne on Wednesday, with the metal’s cash price being $9,385.

On May 6, copper three-month contracts surged to a record $10,724.5 a tonne before paring gains on slowing profit growth in Chinese industrial firms. Costlier raw materials have squeezed profits for these companies.

FSCRIR said that Australia and Canada would see most new projects being launched, followed by the US, Peru and Chile. In addition, Chile will see most of the expansion in the copper projects.

Peru factor

Regarding the rise in production, Peru’s mine output is forecast to increase by 20 per cent this year due to the new projects and last year’s low base effect. Last year, its production declined 12.5 per cent compared with the 2.5 million tonnes (mt) output in 2019.

The Fitch Solutions research body said that multinational miners will continue investing in Peru, which has 10 per cent of the known reserves, due to ample mine reserves, lower costs, and a favourable regulatory environment.

“We believe there is still room for growth through further exploration… Based on Peru’s geography, we believe that there is further upside left in Peru for years to come,” FSCRIR said.

Chinese role

China will continue to play “an increasingly important role” in the Peru copper sector. Chinese firms will make up 17.2 per cent of the total investment in that country over the next decade. However, copper mines ran the risk of “elevated levels of unrest” resulting from the political risk that might have an indirect impact on mining, it said.

One of the features of the rise in mining production is that China’s output would be lower at 1.3 per cent per year during the decade to 2030 compared with 6.9 per cent in the last decade.

This will be due to the closure of low-grade copper mines in the Communist nation and delay in planned capacity expansions, FSCRIR said, adding that new projects would continue to come online.

Chile, another attraction

Congo will be another country that will attract significant Chinese investment, particularly after joining Beijing’s belt and road initiative in December last year. China would also look at investing in Zambian mines, the research body said.

FSCRIR said that Chile has attracted a considerable amount of investments in copper mining in recent years and will begin to pay off in the next few years.

However, the South American nation faces a long-term risk of decline in average ore grades, which would necessitate mining a higher amount of ores. Though Chile faced unrest due to protests, it added that stability was expected to return to the nation in the long-term.

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