Copper Smelters to Run at 80% Capacity on Supply, Freeport Says

LONDON, Oct. 14 -- Copper smelters are unlikely to run at more than 80 percent capacity next year because of a shortage of mine supply, said Javier Targhetta, senior vice president of marketing and sales at Freeport-McMoRan Copper & Gold Inc.

    Mining companies delayed or scrapped new projects after copper prices plunged a record 54 percent in London last year, crimping future supply. Global refined output will drop 1.6 percent this year, according to Standard Bank Group Plc, which this month said copper was its top pick among industrial metals. It will be the first contraction in output since 2003.

    "It will be hard for the whole of the smelting world to even reach 80 percent for 2010," Targhetta, who is also president of Freeport unit Atlantic Copper, said in an interview in London yesterday. "It is a tight market and it will stay like that for a number of years."

    Copper more than doubled this year as China, the biggest consumer, imported record amounts and stockpiles in warehouses monitored by the London Metal Exchange shrank 37 percent from a high in February. Bank of America Merrill Lynch expects copper to average $7,000 a metric ton next year, about 12 percent higher than today, partly because mine supply will constrain refined output in the next several years.

    Higher prices will encourage more scrap supply, Targhetta said. An economic recovery may also boost manufacturing, increasing scrap from industry. The International Monetary Fund on Oct. 1 raised its forecast for global growth next year to 3.1 percent from 2.5 percent.

    Recycled Materials

    Atlantic Copper produces as much as 40,000 tons of copper a year from recycled materials, Targhetta said. The company also produces about 1 million tons of sulfuric acid. Demand from consumers of the acid, including the fertilizer industry, will likely improve next year, Targhetta said.

    Mining companies paid as much as $450 a ton for the acid, the smelters' biggest by-product, on the spot market last year, according to London-based CRU. The miners are likely to seek annual contracts at $30 a ton for next year, though with the smelters paying freight costs, Joanne Peacock, a sulfuric acid analyst at research group CRU, said last month.

    Atlantic Copper this year should produce 270,000 tons of copper anodes, usually refined into a finished form of metal known as cathode, Targhetta said. Cathode output will be 257,000 tons, he said. Next year, the company is expected to produce about 300,000 tons of anodes and 260,000 tons of cathodes.

    (Source: Bloomberg)