Codelco CEO: Copper Prices To Average $6,600/Ton In 2H, 2010

SHANGHAI, Aug 06, 2010 (Dow Jones Commodities News via Comtex) -- Chilean copper giant Corporacion Nacional del Cobre de Chile, or Codelco, expects copper prices to average $3 per pound (around $6,600 per metric ton) in the second half of the year amid Chinese efforts to moderate growth and prevent the economy from overheating, Chief Executive Officer Diego Hernandez said Friday.

London Metal Exchange three-month copper which hit a low of $6,059/ton in early June had since moved up to the $7,300-$7,500/ton range in recent days, but that rally appears to be loosing steam after an unexpected rise in U.S. jobless claims and amid jitters about China's banking and property sectors.

The most actively traded copper contract, for September delivery, dropped 5.1 cents, or 1.5%, to $3.3535 a pound on the Comex division of the New York Mercantile Exchange.

China is the world's largest copper consumer, as well as the primary destination for Codelco's copper exports while Chile is the world's biggest copper producer, accounting for over a third of the global production.

China has been driving consumption and growth in the copper market but any adjustment to moderate growth in the Chinese economy could affect copper prices in the near term, Hernandez said in an interview, while on a visit here.

Hernandez, who became Codelco's CEO after quitting his post as the head of base metals at mining giant BHP Billiton Ltd., said he expects the current volatility in the copper market to continue although tight supply-demand fundamentals will keep copper prices at relatively high levels in the medium-to-long term.

The lessons learned from investment in acquisitions of mining companies during the financial crisis have led to some delays in new projects as companies prefer financing projects with their own cash flow instead of borrowings for new investments, he said. "That is part of the reason there will be a tight supply-demand balance in copper in the next few years."

Codelco will have "good chance" to retain its top global spot in the copper market because of a competitive portfolio and sufficient government support for those projects that will allow the company to reach an output of 2 million tons a year by 2017.

During his first press conference after becoming CEO in May, Hernandez had said the company has a production target of 1.7 million tons for 2010, little changed from last year's levels.

On market speculation that Codelco may list its shares to raise fresh funds and allow the public to take part in the company's growth, Hernandez said there is no national consensus yet on the subject. A listing is not important for Codelco as the state-owned company has all the necessary tools to perform well, he said.

Hernandez said he was not particularly concerned about negotiations with labor unions at Codelco's bigger divisions as the company is "in quite good terms" with the unions. "We have one (negotiation) left in November with RT at Codelco Norte and next year with El Teniente and in 2012 with Andina," he said.

Named copper man of the year for 2010 by the Copper Club, Hernandez is seen as an efficient manager and tough labor negotiator with no political links to conservative President Sebastian Pinera. But he has to deal with Codelco's powerful labor unions that have threatened protests if Pinera moves ahead with pledges to sell part of the state giant.

Raimundo Espinoza, head of Codelco's 16,000-member Federation of Copper Workers and on the state miner's board, had earlier said it remained to be seen how relations with Hernandez would evolve.