Bull market for copper shows no sign of slowing

The bull market in copper doesn’t seem to want to go away. The base metal, which was selling above $1.40(US) per lb at the end of 1987 and has been selling in the $1 range for a good part of this year, is back in hot demand.

At least one producer in the United States, Asarco Inc., was recently listing a price above $1.40, while the December price on Comex in New York was trading in the $1.33 range.

The LME cash price of copper, which is averaging close to $1.10 this year, averaged 81 in 1987 and 62 in 1986.

A stronger industrial demand linked with fears of tight supplies (a miners’ strike in Peru is not expected to help matters) are two reasons cited for the rise in the metal’s price.

Another reason, according to the investment firm Shearson Lehman Hutton which recently published its Annual Review of the World Copper Industry 1988, is a world economy which has shown significant resilience this year, helping to keep the demand for copper firm.

Strikes, equipment shortages and failures and other disruptions have kept several copper-producing operations from reaching their 1988 targets. The result, the Shearson researchers write, is a copper market which has failed to move convincingly away from deficit and inventories which have not built up significantly. Looking ahead

For 1989, however, the company sees copper production taking off and consumption weakening somewhat, with supply eventually overtaking demand.

“A further important facet of the supply picture is that, although mine capacity utilization is due to rise significantly, costs of production are falling. As stocks build up, we expect that increasing downward pressure on prices will be exerted,” writes Shearson, which foresees a possible decline in the price to 80 by the end of 1989. The “best estimate” average price (LME cash) forecast for 1989 is $1.

In the short-term, the researchers see a continuation of a strong and volatile market because of the low inventory situation. Any significant weakening in the market is not expected until towards the end of the fi rst quarter next year.

Also predicting a drop in copper prices next year is Metals & Minerals Research Services of London, which in a recent quarterly report pegged the 1989 average price at 75-80 .

Total non-communist world mine production of copper for 1988 is forecast by Shearson to be about 6.6 million tonnes, an increase of less than 1% from the previous year. The mine utilization rate this year is expected to be about 83%, down slightly from 1987.

Top producer nation continues to be Chile, with about 21% of the total non-communist output, followed by the U.S., Canada, Zambia, Zaire and Peru. Rising consumption

In a recent study titled The Economics of Copper 1988, the London research firm Roskill Information Services draws attention to the growing consumption of the metal. The company says non-communist world consumption of refined copper is 6% higher than in 1979, the peak year for consumption before the last recession. It also points out this growth has accrued to the primary producers, because there has been little change since 1973 in the use of secondary refined copper and of re-melted (but no re-refined) scrap.

Primary copper mines, smelters and refineries in the non-communist world are engaged in a business which, at almost eight million tonnes per year, is 500,000 tonnes larger than it was in 1979, Roskill reports.

“This is not to disguise the fact that, in the interim, the industry has suffered hard times,” writes the company. “From 1980 to 1984, consumption remained lower than in 1979 as recovery from the recession was slow. And prices did not regain the 1979 level until well into 1987 — in current dollars, let alone inflation-adjusted dollars.”

Producers have taken the opportunity to improve their station; production methods have been modified and costs reduced, most notably in the U.S., Roskill says. Operating costs throughout the non- communist world have been reported as low as 30 per lb, with 80 being near the higher end of the range.

Solvent extraction and electrowinning techniques have made possible the exploitation not only of low grade ore deposits which had previously been ignored, but also of the tailings discarded by past operations. So successful have the recovery methods been, Roskill says, that some of the techniques developed by the copper industry are being adapted to reduce the costs of producing other metals, including gold. Magnesium plant for Quebec studied

An $8.5-million feasibility study for a world-scale magnesium plant in East Broughton, Que., will be undertaken by Magnola, a 50/50 joint venture between Noranda Inc. (TSE) and Lavalin Inc.

The plant would use proprietary technology to extract magnesium from asbestos tailings in the Thetford Mines area of the province. The federal and Quebec governments will contribute 50% of the cost of the study under the federal Minerals Development Assistance Program.

The study will take two years to complete and will include pilot- plant testing at the Centre de Recherches Minerales, using technology developed and patented by the Noranda Technology Centre. Feasibility and basic engineering activities will be carried out by Lavalin. The environmental impact will be studied, with the focus on external as well as in-plant hygiene issues.

Magnola has already undertaken a pre-feasibility study. Envisioned is a plant costing about $500 million which would provide about 400 new jobs in the Thetford Mines area.

Canada has one primary producer of magnesium, Timminco Ltd., which operates a plant in Ontario near Ottawa. Two new plants are under construction, one in Quebec (Norsk Hydro) and the other in Alberta (Magcan).