BLBG: U.S. Copper Demand May Be at Bottom, Codelco Says
U.S. demand for copper may have reached a bottom amid government plans to boost spending on infrastructure and revive the economy, said the head of Codelco, the world’s biggest producer of the metal.
There are “some signs” U.S. demand may cease falling while manufacturing and construction remain “very depressed,” Codelco Chief Executive Officer Jose Pablo Arellano said today at a news conference in Santiago. There aren’t indications yet of a European recovery, he said.
China, the largest consumer of copper, shows a “dynamism” in its demand for the metal, Arellano said. Copper has gained 31 percent in three months, the second- best performer after gasoline among 19 raw materials tracked by the RJ/CRB commodity index, as China increased purchases of the metal.
Copper futures for delivery in May rose 7.85 cents, or 4.4 percent, to $1.8445 a pound on the Comex division of the New York Mercantile Exchange.
In the first quarter, output cuts by rival producers helped boost prices, Arellano said. Competitors such as BHP Billiton Ltd. and Freeport-McMoRan Copper & Gold Inc. have pared spending and projects because of lower demand.
Codelco is proceeding with about $2 billion in investments this year to arrest declines in output, even amid the “difficult market,” Arellano said.
Declining Profit
The slump in prices and lower output caused state- owned Codelco’s profit to decline by almost half last year to $1.6 billion. The price for copper has tumbled 57 percent from a record $4.2605 a pound in May in New York.
The “long-term” price outlook, which will by buoyed by demand in developing nations, is below $2 a pound, Arellano said. Copper last year averaged $3.12 a pound.
Codelco’s output will rise this year as the Gaby copper mine, opened last year, increases production by about 80,000 metric tons, Arellano said. Codelco’s reserves are large enough to maintain current production levels for more than 60 years, he said.
The company’s output may increase as much as 5 percent this year, Mining Minister Santiago Gonzalez said today in an interview in Santiago. Annual production dropped to 1.55 million tons in 2008, from 1.67 million tons in 2007.
