Lower demand, prices seen for copper

There’s no doubt the price of copper, which topped $1.40(US) per lb at the end of 1987 but has settled back into the 90 cents -$1.10 range of late, has spurred mining activity of the base metal.

Figures provided by securities firm Shearson Lehman Hutton in a recent quarterly report project improved mine production this year in North America (particularly by the U.S.), Latin America, Asia and Australasia. Europe and Africa, on the other hand, are expected to have lower totals compared with 1987. And, in refined output, the U.S. is singled out as the nation to watch this year. Shearson projects primary refined production in the U.S. in 1988 will jump by almost 17%, accounting for more than half of the estimated growth of the refined product for all of the non-Communist world this year.

Other nations to watch for improved refined output in 1988 include Canada, Brazil and Mexico.

Preliminary figures show non- Communist world copper production in 1987 of 6.56 million tonnes, only a slight increase from the previous year. In 1988, Shearson forecasts a jump of 5.3%, to 6.91 tonnes.

Biggest producer-nation continues to be Chile, which turned out an estimated 1.4 million tonnes of copper last year. Not far behind in mine production, however, is the U.S., which in 1988 could approach Chile in total output. Canada is listed as the third largest copper producer, with an estimated production of 745 tonnes in 1987.

According to Shearson, the bull market of the last quarter of 1987 was overdone and new projects will lead to a sharp hike in copper output both this year and into 1989. Accompanying these moves, Shearson says, will be a flattening of demand and a move by the market into a position of surplus.

“As production picks up sharply and demand stagnates, a modest surplus is expected to emerge this year followed by a major oversupply in 1989,” writes the company.

“Actual stocks of copper are forecast to build up, gradually at first and then much more quickly next year. In fact, inventories show every sign of having already bottomed out and of starting to rise.

“The price action so far in 1988 more than confirms the solid shift from shortfall. Increasingly, it appears the bull market of last year was overdone.”

Shearson is calling for weaker prices from May-June onward, and forecasts a price of 75 cents by year-end with no residual backwardation. Helping to soften the price’s descent is the continued weakness of the U.S. dollar, relatively low inventories and an apparent increase in mine capacity utilization rates. An average price of 90 cents is forecast for 1988, with an oversupply of copper in 1989 expected to help bring about yet lower prices. Copper averaged 82.5 cents in the U.S. last year.

Strong gold production growth in Canada is expected to continue this year and in 1989, with 156 gold projects in advanced stages of development, Metals Economics Group of Boulder, Colo., says in a new study titled Potential New Canadian Gold Production.

According to the study, 58 new mines, with a combined annual production capacity of more than 2.2 million oz gold, are scheduled to come on stream in 1988 and 1989 if current feasibility work merits. Twenty-four projects, representing more than 1.3 million oz of annual new production, have made final production decisions; 17 of those projects are scheduled for start-up this year.

Ontario leads the country in late- stage gold development with 42 projects which contain about 13 million oz of gold reserves. Quebec has 38 projects containing 11.3 million oz and British Columbia, 39 projects containing 9.8 million oz

A major producer-refiner of indium in the U.S., Indium Corp., has announced plans to build a new refinery for the production of indium, high-purity indium and indium inorganic chemicals. The new facility will allow the company to turn out more than one million oz per year.

Among the uses for indium are as a solder with precious metals, including gold, and as a semi- conductor. Earlier this year, Cominco Ltd. announced an expansion of its indium-producing operations at Trail, B.C.

Plans to turn around South Africa’s slipping gold production are in the works, says the assistant general manager of that country’s Chamber of Mines. National production, which fell to 607 tons last year from 640 tons in 1986, will rise to 750 tons in 1988, he forecasts.

South Africa’s gold production, which accounts for about half of the non-Communist world’s annual output, has been suffering from increasing operating costs and a decline in average grade, which has fallen from 0.47 oz gold per ton in 1970 to 0.19 oz in 1987.