Reuters reported that the positive long term outlook for copper remains intact. Debate over whether the decade long bull run in commodities has ended has ramped up in recent days as China heads for the slowest pace of annual growth in more than a decade, driving down the prices of copper, iron ore and other raw materials.
Rio's larger rival, BHP Billiton earlier shelved tens of billions of dollars in expansion plans due to soaring development costs, a high Australian dollar and an uncertain outlook, prompting Australia's resources minister to say the boom was over.
Mr Andrew Harding head of Rio Tinto said that "The long term copper outlook remains positive. At Rio's 55,000 tonnes per year Northparkes copper mine in western New South Wales. Global growth in supply of copper is still challenged. People are still struggling to meet their production targets."
Mr Harding said that while Chinese copper demand faced a slowdown, the longer term was brighter and he had no doubt Beijing's efforts to stimulate the Chinese economy would succeed. There is no doubt we are going to see an interruption in the near term but I've got complete confidence the long term is still completely intact. The reality is we have long term increasing demand driven by the people in China and by a lesser degree but ultimately more importantly, by India."
Rio is forecasting production of 580,000 tonnes of mined copper and 300,000 tonnes of refined copper in 2012. Global demand for copper is expected to outstrip supply this year, despite China's slowing economic growth due to mine disruptions and a lack of new major copper projects.
According to analysts, BHP's decision to shelve the USD 20 billion expansion of its Olympic Dam project, the fourth largest known copper deposit in the world, will also tighten global supply from late 2013. The project in South Australia would have accounted for around 4% of global copper needs at its expanded peak.
Mr Harding declined to comment directly on the impact of BHP's decision, but acknowledged that it would affect prices if the market had been factoring in the lift in production. No one can really predict what the price is going to be.
BHP postponed the expansion following a fall off in benchmark international copper prices this year since reaching a peak of about USD 8,760 per tonne in February. Prices have rallied in recent days, though remain well of their best this year. The benchmark three month contract at the London Metal Exchange stood at USD 7,620 per tonne.
Source - Reuters
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