Copper production curb possible if less demand continues in China
Oct 16, 2015 07:43 AM EDT
The price of copper declined for a second day as China's manufacturing goods deflation extended a stretched-out record of plunges, renewing concern about a deceleration in the world's largest consumer. Most metals used in industrial works are held near their lowest levels this week.
The National Bureau of Statistics said on Wednesday that China's producer-price index declined 5.9%, stretching its trace of negative findings to 43 months. The data was announced a day after a report showed the country's imports collapse an 11th month. Copper fell 17% this year as China's slowest economic growth controls demand since 1990, according to Bloomberg.
"It is another weak figure from China," Jens, an analyst at Danske Bank A/S in Copenhagen, said by phone. "The picture of the Chinese economy is still a relatively weak one and we have no reason to be optimistic about growth in the near term."
The fuss in metals forced some of the world's largest producers to lessen output in a bid to support prices. Glencore Plc will reduce copper and zinc supply while Freeport-McMoRan Inc. will further control copper production this week if necessary.
Investors are warned by Codelco, world's largest copper producer, not to expect any dramatic changes to its record investment plans. Its mines are very likely to remain lucrative even as concern over Chinese demand is set to keep prices low in coming years, as said by Chairman Oscar Landerretche on Monday.
Antofagasta is a copper mine run by the richest family in Chile. Its head believes that prices of the metal are near the bottom as a small increase in Chinese demand next year is set to occur further declines, the Sunday Morning Herald reported.
"It doesn't look like it will go down more than what it is," chief executive Diego Hernandez said in an interview in London on Thursday. Still, prices may remain flat through next year as a modest increase in Chinese demand is expected to absorb any supply increase, he said.
The opinion resembles that of Chile's Mining Minister Aurora Williams saying that this week that lower prices will persist through next year followed by a measured recovery in early 2017. Copper fell 16% this year as China's economic slowdown means there is less demand for pipes, wiring, and other building materials.
"If China wants to continue to grow at a reasonable pace they need to continue with programs on infrastructure and power distribution," Hernandez said. If the Chinese economy continues to grow at 6 per cent to 7 per cent annually then copper demand will grow by at least half of that figure, he said.
The stock increased 1% to close at 586.5 pence on Thursday. The FTSE 350 Mining Index has dropped 29% in 2015.