US mining equipment manufacturer Caterpillar said that its largest customers are looking for a return to growth in the mining industry in the next 18 months and view the price of copper as a key indicator of a turnaround.
US copper futures on the New York Mercantile Exchange's COMEX division have risen from USD 1.38 per pound at the start of 2009 to current levels above USD 1.65 per pound. When copper sinks below USD 1.10 per pound, more miners shut some operations completely and copper at USD 1.40 serves as a break even level for many producers.
Mr Chris Curfman president of Caterpillar's global mining division said that "It's really the copper price that we watch. At USD 2.00, I'd go on a camping trip. But it's got to get up to USD 1.80. Once I see that level I'll feel really comfortable."
Mr Curfman said that Caterpillar is close enough to the big copper producers to see at what price level they would become active again and USD 1.60 per pound seemed a threshold prompting some miners to put idle equipment back to work. When copper went to USD 1.65 last week, Baghdad copper mine put their trucks, which were parked, back in the dirt. Copper at USD 1.65 isn't all bad, depending on the ore quality. While some mining customers seem convinced that copper will slide as low as 90 cents, Mr Curfman thinks demand from China and other infrastructure building countries will keep the price from falling much further than its recent four year low around USD 1.27 per pound.
He said that if you talk to the copper producers, they think that because of China and India and the urbanization process, copper is going to come back. It's just a matter of how quickly. Given the rapid downturn in metals mining recently, the Peoria, Illinois based heavy equipment manufacturer was hit with an onslaught of delays and cancellations.
Mr Curfman said that they were substantial in North America and Australia as well as emerging markets where Greenfield projects were not being funded over the next year to 18 months. Caterpillar has several thousand delayed customer orders. Where possible, customers opted to delay rather than cancel for fear of losing their place in the queue when the industry does turns around. It's simply a delay, because a lot of people think this thing is going to bounce right back up. With mine plans running 10 to 20 years, some of Caterpillar's largest customers, like BHP Billiton are expecting 18 month delays on some mine projects and remain optimistic longer term.
He said that "We are seeing some cancellations. We are seeing a clump of orders still being sat on by most of our big alliances. They are reluctant to cancel for fear of losing their position on the order board, which are out 2010, 2011 and 2012. We're still negotiating with the big guys and still doing deals but for delayed activity. Still other customers are adding new orders, mostly among gold miners in Latin American.”
(Sourced from Reuters)
