Global copper production to grow 3% annually until 2029
Global copper mine production will continue to grow over the next few years as a number of new projects and extensions go online, supported by rising copper prices and demand, Fitch Solutions predicts in a new report.
Fitch analysts forecast an average annual increase in global copper mine output of 3.1% per year for 2020-2029, with total production increasing from 20.3 to 26.8 million tons over the same period.
For 2020, Fitch predicts that Chile will increase production slightly by 0.5% to 5.89 million tons. Growth will be led by BHP’s increase in Spence Growth Option in the second half of 2020, increased production at Lundin Mining’s Candelaria mine and a recovery in mine production hampered by heavy rains in early 2019. According to Fitch, these developments will outweigh the declines in Antofagasta’s Centinela production due to lower ore grades and Quebrada Blanca by Teck Resources.
Downside risks to production will stem from declining ore grades across the country, unfavorable climate, protests that hamper supply chain operations and union strikes, analysts predict.
Fitch forecasts Chinese copper mine production to increase at an average clip of 1.8% per year over 2019-2028, compared with an average growth rate of 6.9% over the past 10-year period. This slowdown in production growth will be driven by closures of low-grade copper mines in China and delayed planned capacity expansions.
Growth in domestic production will still be positive as new projects come online. A weaker Chinese yuan against the US dollar will help reduce costs for domestic Chinese mines, says Fitch. China, being the world’s largest consumer of refined copper and third-largest producer of mined copper, will look to develop foreign assets to improve its resource security.
Chinese copper miners will remain committed to investing in copper deposits abroad to secure access to high-grade, low-cost material. For instance, in October 2019, Zijin Mining announced that it would spend $146 million to increase its interest in Ivanhoe Mining. The purchase will make Zijin the second-largest shareholder in the company developing the Kamoa-Kakula copper mine in the Democratic Republic of Congo (DRC).
Australia and Canada to dominate new projects
Canada has the largest new copper project by capex, as Seabridge Gold announced in March 2019 an updated indicated resource of 423 million tonnes at the Iron Cap deposit at its KSM project in British Columbia.
Fitch analysts are revising down slightly their forecast for Peru’s copper production growth from 1.0% y-o-y in 2020 to 0.0% growth. The revision comes on the back of lower production guidance for MMG’s Las Bambas operation, with copper production expected to range between 350,000-370,000 tonnes over 2020 from the 382,000 tonnes produced in 2019.
Adding to the headwinds is an expectation for lower copper output at the jointly owned Antamina mine. However, Minsur SA is expecting copper production at Mina Justa to commence in Q4 2020, which will help to prevent a contraction in Peru’s mine copper output.
Over 2020, Fitch maintains its modest growth forecast of 2% on US copper production as the Pumpkin Hollow mine ramps up. Despite pressure on profit margins as spot copper prices remain lower than expected, US miners are positioning themselves for long-term recovery in global copper demand.
US copper miners are better positioned financially than operators in other markets, having worked to cut operating costs and increase profitability over recent years. In the longer term, Fitch believes copper outlook in the country will recover, driven by a rise in copper prices and continued foreign investment which will be lured by the country’s high-grade reserves.
