growing copper surplus is the result of rising supply rather
than slowing demand, but it is still likely to be marginal and
could be easily reversed if projects experience problems,
according to Antofagasta Plc chief executive officer Diego
Hernandez said the
surplus, which will emerge during the fourth quarter and last
into the next couple of years, will be smaller than expected
and probably marginal. "Itll be less than 200,000
tonnes," he told AMM. "If China rebuilds its
inventories or consumes just a little more, we would have a
quite tight supply-demand balance for the full year."
The larger surplus is
due to an increase in supply, Hernandez said. "There are new
projects, some greenfield projects, but these could have some
delays or problems, so I think the surplus will be very small
this year. Next year some projects will be on time, and others
are more doubtful." But the market will tighten in 2016, he
Hernandez, Chinese demand for copper is experiencing a slight
pickup that has been a pleasant surprise, given market
expectations for a broader economic slowdown there throughout
"We dont expect
any copper demand growth in Europe, although the decline there
has reached its bottom, and the U.S. is slowly picking up, with
some positive signs of demand," he said. "But overall, the
increase in demand will come from China and other emerging
economies, although the latter are smaller markets."
Hernandez said that
treatment and refining charges (TCs/RCs) are quite high
currently but not yet high enough for Antofagasta to
contemplate investing in its own new smelting capacity.
"Its too early to think about (investing in a smelter),
but certainly if TCs are not driven by supply-demand we have to
think about it," he said.
High premiums are
related, in part, to the warehousing queues, although only on a
very short-term basis, Hernandez said. "If you have inventories
locked in a warehouse, its that amount and thats
Hernandez said that
being able to establish the size of copper inventories that are
off warrant is one of the trickiest issues facing the copper
industry, along with how much scrap is available to the market,
which is "almost impossible" to predict.
fluctuates depending on the copper price, and I think the
market is adjusting first to scrap," he said. "For instance,
one of the reasons why China has been buying more cathode is
because (it) couldnt get the scrap."