Copper more cost-competitive, Phelps Dodge president says

The next eight years (to 1995) should be a time of consolidation and opportunity for the copper industry, says the chairman of the board and president of Phelps Dodge in the United States.

“Although we do not foresee copper prices returning during this period to the high levels of the early 1980s, the rationalization of the industry of the last several years has resulted in a much lower cost structure,” G. Robert Durham told the American Mining Congress Financial Conference recently.

Copper, he said, has become more cost-competitive, as a raw material, against aluminum and other competing materials. The average Metals Week domestic copper price in 1981, he said, was about 79 cents per lb, compared to 60 cents for aluminum, while in 1986 the average copper price was 66 cents , compared to 56 cents for aluminum. And, he said, the gap between average production costs for copper and aluminum, per pound of metal, has narrowed dramatically.

“This is not to say that substitution by competing products will not continue, because price alone is often not the driving force,” Mr Durham said.

“For example, I expect fibreoptics to continue to replace copper in telecommunications, where many of the tasks can be done better by fibreoptics. But it does mean that the copper industry is going to be much more able to compete on the basis of the strengths and properties of its product, without price being the deterrent.

“Some of this new competitiveness is already being seen — in magnet wire, where aluminum penetration is being reversed, and also in copper tubing and other building products.”

Mr Durham said the copper industry has not been active enough in market development and must seize the opportunity to strengthen its product’s hold on existing markets and build new ones.

In his speech, Mr Durham made mention of efforts to establish an international copper producers and users forum which would provide the copper industry with another vehicle for new product opportunities.

Assuming the world’s economy generally follows the same cyclical pattern of the past several decades, copper consumption should continue to grow modestly, he said. Free-world consumption of copper in 1986 was an estimated 8.1 million tons, he said, and by 1995 is expected to be around 9 million tons. Copper from scrap will continue to meet about 15% of the demand, he said.

Barring any unexpected and prolonged disruptions in supply, Mr Durham said supply and demand should stay in reasonable balance and copper prices should grow only moderately higher than they are today by the middle of the next decade.