Codelco Sees Global Copper Glut as Mines Reopen

LONDON, Oct. 14 -- Codelco, the world's largest copper producer, predicts demand will weaken and producers will restart mines closed during the economic crisis last year.

    Global output will exceed worldwide demand this year and next, Codelco Executive President and Chief Executive Officer Jose Pablo Arellano said today in an interview in London.

    Demand will be "not that strong" compared with previous quarters, he said. Rising prices for the metal used in plumbing and wiring will prompt companies to restart shuttered mines and attract more scrap metal to the marketplace, he said.

    Copper prices about doubled this year as China, which now consumes a third of the world's supply, boosted spending on infrastructure such as bridges and roads. Chilean state-owned Codelco will boost output by 150,000 metric tons this year as it seeks to stem four years of declines, Arellano said.

    World copper production will exceed demand by 370,000 metric tons this year, because of fewer purchases of the metal outside of China, said the Lisbon-based International Copper Study Group, which is financed by producers. The surplus may widen to 540,000 tons next year, the ICSG said.

    Copper demand may increase in the U.S. and Japan next year, reducing a surplus, Arellano said. The U.S. is the world's second-largest copper consumer after China. Japan is fourth behind Germany, according to London-based research company CRU.

    China Keeps Growing

    China "will keep growing" as the government continues its stimulus to boost infrastructure spending, Arellano said.

    "We are not going back to the prices of the '80s and '90s," Arellano said. Prices on the London Metal Exchange averaged $2,241 a metric ton during the 1990s, less than half the average price for the past five years.

    BHP Billiton Ltd., the world's largest mining company, will also add to world supplies after restarting a mill at its Escondida mine in August, Arellano said.

    (Source: Bloomberg)