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Economic, technological, and societal factors influence the supply and demand for copper. In the last 100 years, industrial demand for refined copper has increased from 0.5Mt to over 19Mt par annum. As world population continues to expand as well as standards of living and well being, demand for copper tends to increase, while remaining sensitive to variances in economic cycles, changes in technology, and competition between materials for uses in applications.
A major metal in civilisation from the beginning, copper in its refined state (ie. copper metal grading +99.5% Cu (image) involves a long chain of technology; it starts with mining of ore containing copper bearing minerals (image), then treating such ores to concentrate copper bearing minerals a process called beneficiation(image), then concentrating further by a metallurgical process called smelting the concentrate (image), and finally refining the smelted product to produce the high grade refined copper used by the copper industries, a process called electrolysis (image). Typically low grade ores are produced with ±0.5% Cu grade, beneficiation concentrates the ore to 30-32% Cu grade, smelting produces anodes at 97% Cu grade, and refining produces refined copper at +99.5% Cu grade.
As global demand for copper increases, existing operations are expanded where possible, and new mines, concentration plants and smelters are developed. In times of market surplus, existing operations can be scaled back or closed down, and planned expansions can be put on hold. When supply exceeds demand, due to misbalance between production and uses, the London Metal Exchange ensures regulation to some degree by constituing stocks.
The more developed regions of the world use copper as an important component of their infrastructures. But as less developed regions expand their infrastructures, copper will help to form the building blocks required to increase living standards.
Copper market surpluses result from too-rapid development of production facilities based on past buoyant prices. Investors had perhaps foreseen the rapid growth in copper demand in the late 1990s ? five years of unprecedented growth, despite the Asian financial crisis of 1997-98. But their failure to recognise fully the dangers of uncoordinated development created four successive years of surplus production until a supply deficit was recorded in 2000. The developed economies´ collapse in demand in 2001 created another surplus, before supply and demand returned to balance in 2002 ? a situation that continued through into 2004. Copper demand then continued to increase with demand in excess of supply and price increases.
Projected expansions of mining, smelting and refining capacity over the next five years are in line with reasonable forecasts of world primary copper demand. How well demand and supply match up will depend partly on the timing of new mines and major mine expansions now under development, or in advanced stages of planning.
Cost pressures have led to a spate of mergers and consolidations, with the main game being the battle for control of the North American producers. The acquisitions of Cyprus Amax by Phelps Dodge and of Asarco by Grupo Mexico, and more recent mergers between BHP and Billiton, and Teck and Cominco, have tightened control over the world´s copper output. The top ten producing companies controlled 47% of world mine capacity in 1990. That figure has now risen to about 55% and AME analyses forecast trends until 2008.
The Central and South American region, and more particularly Chile, continues to dominate world copper output. More than 75% of the forecast expansion of mine production capacity occurs in this region, and by 2006 Chile is expected to be producing over 30% of the world´s copper concentrates as well as around 53% of SX-EW copper.
World Primary Copper Consumption With Projections
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