High copper prices stimulate supply? McMoran Copper Gold (FCX.US) disagrees with Goldman Sachs

FCX.US, the world's largest listed copper company, and Goldman Sachs are bullish on the future of copper. However, they seem to disagree on how much impact higher prices will have on supply growth.

Goldman Sachs analyst Nicholas Snowdon said on Wednesday that copper prices, which are now near an all-time high, need to rise further to stimulate supply feedback. On Thursday, Richard Adkerson, the boss of McMoran Copper Gold, pointed out that the market tension "goes far beyond the price problem".

While copper companies such as McMoran Copper and Gold are making a lot of cash, there is little they can do to significantly speed up the project, given the deteriorating quality of copper mines and a harsher operating environment, Adkerson said in an interview. This is a problem because demand for copper is bound to surge during the clean energy transition.

"even if the price of copper doubles overnight, it will take years for our production to increase significantly," he said. The market needs it much faster than companies like us can produce copper. "

The war between Russia and Ukraine has had less impact on copper than other commodities because Russia accounts for less than 5 per cent of global copper supply, even so, according to Adkerson Adkerson, supply disruptions can still be felt in the current tight market. Another big open question is how the war will affect the global economy and, in turn, future copper demand. "Nobody has a clear idea at the moment," Adkerson said.

Barring a major disruption in the economy, copper will become scarce as demand in the electric car and renewable energy industries picks up, Adkerson said.

McMoran Copper and Gold is making its own contribution to increasing global production. A new underground mining project in Indonesia is accelerating to become the second largest copper mine in the world. At the same time, the company is expanding its copper mine in Arizona and is working to develop new technologies to extract more metals. In Chile, however, McMoran delayed a decision on a major investment.

Asked whether the difficulty of building a new mine would make the asset acquisition more attractive, he said the acquisition was not one of the basic strategies of McMoran, but would be considered if there was an opportunity. While the focus is on expanding existing mines, he said: "if we have the opportunity to create value for shareholders, we will be able to implement it."