Copper mining outlook

The outlook for the Copper Ore Mining industry points to falling revenue for the five year period to 2012-13, as US dollar copper prices retreat from the extraordinarily high levels prevailing in the mid 2000s, according to IBISWorld.

The high copper prices of recent years are producing a substantial supply response.

Mines closed during the early 2000s (notably in the United States) are being reactivated and there are plans for new and expanded output at other operations, including those in Australia.

Additions to supply will see prices moderate to more sustainable levels.

The great bulk of the new copper mine capacity coming on stream is relatively low cost, and copper prices below the levels prevailing in the mid-2000s.

A continuing expansion in world economic activity is expected to underpin solid growth in the demand for copper.

In particular, demand from China will continue to rise strongly due to ongoing spending on that country’s electricity infrastructure as the Chinese Government lifts spending on power plants in an effort to overcome electricity shortages.

Australia’s mine output of copper is expected to continue increasing over the outlook period to about 1.14 million tonnes by 2012-13.

New mines, such as Prominent Hill and Sulphur Springs are expected to come on stream and incremental increases in output are likely to be made at Xstrata’s operations.

Smelter and refinery capacity will not be able to keep pace with the growth in mine output and exports of unrefined copper will increase.

A more substantial increase in copper may occur towards the end of the outlook period. In August 2005, BHP commenced an environmental assessment of its proposed $5 billion expansion of Olympic Dam, where copper capacity currently stands at about 220,000 tonnes per year.

The proposed expansion would more than double copper output to 500,000 tonnes per year and lift uranium production capacity to about 15,000 tonnes per year (from the current level of 4,000 tonnes).

Approximately two years of analysis and consultation is anticipated prior to BHP Billiton making a decision regarding the expansion.

If the project proceeds, output is unlikely to begin flowing from the expansion prior to 2011.

After rising very strongly in the mid 2000s, the real revenue of the Copper Ore Mining industry is expected to fall continuously over the outlook period, as continued gains in production fall to offset the impact on revenue of lower copper prices.

Overall, real industry revenue is expected to fall at an average annual rate of about 11% during the outlook period, with real value added falling at an average annual rate of about 10.5%, as miners pursue cost containment. However, it must be remembered that this weak outcome follows a period of extraordinarily strong revenue growth over the five years ending in 2007-08.


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