Reuters reported that falling copper prices may already have over reacted to macroeconomic worries given robust underlying demand from China and constrained supply. The miner had not seen any customers cancel orders.
A top Anglo American executive said that copper prices have dropped by more than a quarter since the end of June with benchmark prices on the London Metal Exchange falling to 14 month lows of USD 6,635 as the threat of Greece's debt default increased.
Mr John MacKenzie Anglo American's head of copper said that “We are seeing a lot of volatility in the copper price for other reasons but it comes back to the fundamentals and the fundamentals look strong. China has been the driving force behind demand for the last 5 or 10 years and that remains strong.”
He said that the amount the copper price has fallen has very little to do with the fundamentals of supply and demand probably if we were looking at only the fundamentals, it should not have come down as far as it has.
Mr MacKenzie, who took the reins of Anglo American's second largest division in 2009, echoed comments made by rival Freeport McMoRan, the world's largest listed copper miner and said Anglo continued to see good demand despite market volatility and falling prices.
He said that we haven't seen any cancellations in any orders. We are not seeing at this point any impact on our sales. In fact, what we are seeing in China right now is the concentrate market becoming fairly tight. That was due to Freeport mine strikes but also due to the fact less scrap was available.
Mr MacKenzie said that demand in China had been partially masked this year by destocking activity after the stockbuilding that followed the last market crash. There is no reason to think that with prices having dropped as they have, the Chinese will not be getting in again and restocking. There is evidence they are already doing this. They are opportunistic.
He said that on the supply side, copper has also been underpinned by constrained supply as miners face challenging new operations lower grades, higher costs and tougher permitting conditions. Lower prices would make it even tougher.
He added that with a lower price environment and a lot of the projects in the industry pipeline being far more marginal than existing operations, it places them in a very precarious position.
