In order to stabilize the value of copper is necessary to further production cuts
25 October 2015
Specialists Bank of America Merrill Lynch believe that copper producers should continue to decline in production. The average decline in production will require 500 000 tonnes. Only then will be able to stabilize the price of copper. This volume is a little more than 2% of predicted suggestions in 2015. The bank noted the negative attitude of manufacturers to a greater decrease in volumes. But it is likely that the cost of the copper quotations need another push. Then it will be possible to gain «production discipline.»
Experts shared the «threatening» development into two groups. The first is the aging mines with high costs. The second — the projects to stay afloat thanks to the by-products. These include molybdenum and gold. BAML believes that the average price of copper in 2015 will reach 5602 USD / ton. In 2016 the price dropped to 4513 USD / ton. The spot price is established at the level of 5288 USD / ton.
Meanwhile, Rio Tinto is not going to reduce production capacity. Even the fall of the cost of copper did not affect the decision. According to Jean-Sebastien Jacques, head of operations for the extraction of coal and oil, the move illogical. It makes no sense to reduce copper production. It provides competitors with a significant cost opportunity to get market share.
In 2015, the cost of copper has decreased by 20%. The metal is widely used in electronics manufacturing. The fall has occurred against the backdrop of the fall of the Chinese consumer. According to some experts in the PRC accounts for 40% of global demand for copper. After the economic slowdown of the country prices went down sharply. many kinds of raw materials consumed by the producers have been affected. In the near future the price recovery is not expected. Stabilization is possible under the dominance of demand over supply. This development will not happen until 2017. In 2015, the production of copper raw materials in terms of pure metal reached 18,751,000. Tons. Compared to the year 2014 will grow by 1.2%. The following year, the growth rate will reach 4.2% to reach 19,542,000. Tons. Global copper production will increase by 0.8%. Volume production will reach 22,669,000. Tons. In 2016, production will increase by 2.3%. Volume amounted to 23,183,000. Tons. As to consumption, in 2015, a decrease of 1.2% to reach 22,628,000. Tons. In 2016, it increases to 3% and amounted to 23.310 mln. Tons.
