Rio Tinto Forecasts `Strong' Copper Price Amid SupRio Tinto Group, the world’s third-largest mining company, forecasts high copper prices willcontinue amid rising demand and before output from new projectseases a supply shortfall.
“We will see a continued period of strong copper pricing,largely because many of the large mines, including our own, areseeing declining grades, deepening pits,” Tom Albanese, chiefexecutive officer of London-based Rio Tinto, told AustralianBroadcasting Corp.’s Inside Business television program.
Copper in London surged to a record last week and gained 52percent in the past year as the global economic recoverygathered pace, boosting demand for the material used inconstruction and electrical appliances. Substitution of othermetals for copper is accelerating as costs rise, aluminum-producer Alcoa Inc. said last month.
The global copper supply deficit will reach 822,000 metrictons in 2011, more than double last year’s shortfall, BarclaysCapital said on Jan. 20. JPMorgan Securities Ltd. and MacquarieBank Ltd. have also predicted a deficit, and Australia & NewZealand Banking Group Ltd. and Morgan Stanley have boosted theirprice forecasts.
“We’re working on several new projects around the worldand I know, certainly our competitors are working on their ownprojects,” Albanese said in a transcript of the program, whichwas broadcast yesterday. The longer that copper prices stayed athigh levels, the more new supply would be induced, he said.
Price Gains
Three-month copper on the London Metal Exchange gained 0.2percent to close at $9,961 a ton on Feb. 11 after rallying to anall-time high of $10,160 on Feb. 7. Rio Tinto rose 1.6 percentto 4,623.5 pence at the 4:30 p.m. close of trade in London.
Rio Tinto’s expansion plans include the Oyu Tolgoi copperproject in Mongolia, while the company also had “additionalopportunities” in South America and North America and at itsNorthparkes mine in Australia’s New South Wales state, Albanesesaid.
Rio Tinto posted record 2010 net income of $14.3 billion onFeb. 10, boosted by iron ore and copper prices. The companyraised its dividend and announced a $5 billion share buyback.
The 2010 global refined copper deficit is expected toincrease through 2011 and 2012, leading to more talk aboutsubstitution with other materials, Rio Tinto Chief EconomistVivek Tulpule said in a report released with the earnings.
“The prospects of rapid and significant material switchesare expected to be limited in the near term given thesubstitution that has already taken place,” he said. Theintroduction of exchange-traded funds in copper could also havea “significant impact” on copper prices in the coming year byadding to investment demand, Tulpule said.
Consumption trends over the next 15 to 20 years would leadto a doubling in demand for
iron ore, copper, aluminum and othercommodities, Albanese said in a results briefing on Feb. 10