The global supply of copper will fall short of demand until the second half of 2013 as environmental and financing difficulties delay new production plants, the chief financial officer of Peru's Southern Copper said.
Project delays and unexpected production halts have maintained a five-year copper supply deficit of between 300,000 and 400,000 tonnes a year, or about 3 percent of the world's production, helping prices hit an all-time high early in 2011. Chances are that a similar gap will be seen again this year despite an expected economic slowdown in China, said Raul Jacob, CFO of Southern Copper, Peru's largest producer of the metal. "Eventually, supply will catch up with demand at some point in the second half of 2013," Jacob told Reuters after talking to investors at the New York Stock Exchange.
News that China, which consumes about 40 percent of the world's copper production, was cutting its 2012 growth target to an eight-year low of 7.5 percent was only a "relative concern" for Southern Copper.
"The 7.5 percent growth in China's GDP will eventually convert into (growth of) 10 percent or higher in copper demand," Jacob forecast, adding that China bought "a lot of copper" in 2009, when the global economy plunged into recession following the collapse of financial markets. The financial crisis continues to hinder new project developments, especially from smaller miners, while labour and environmental issues are a challenge for bigger players, he said.
"The financial crisis is not helping new projects to develop, it's not helping junior companies to move forward with projects. It's creating instability worldwide and these kinds of things certainly affect the market," he said.
Southern Copper, although having no trouble in obtaining financing for its projects, delayed last month the start date of its $1 billion Tia Maria mine in southern Peru to 2015 from 2013 after opposition from local farmers who feared losing control of water supplies.
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