The global copper market is moving towards deficit faster than expected, but Chilean copper producer Antofagasta plc is sticking to its cautious investment plans, CEO Ivan Arriagada said ahead of the World Copper Conference in Santiago.
With China, the world's largest consumer of copper, demanding more metal than expected and a lack of new major mine projects entering production, analysts had been predicting demand to outpace production by the end of the decade.
"While we were expecting a shortfall by 2020, that has probably moved forward by a couple of years," Arriagada told Platts in an interview.
Demand has been ramped up around the world by increased investment in renewable energy and electrification while underinvestment by existing producers could mean an even tighter market than analysts predicted.
"Because of the downturn, we have not seen all of the investment required to sustain production and that will have an impact on copper production in the next couple of years," Arriagada said.
All of this should prove supporting for prices which last year slumped to their lowest level since the global financial crisis.
But Arriagada remains cautious.
"More than where it might go, we do not expect to return to the prices we saw last year and, if you push me further, I would say that I do not expect prices to be below $2.50/lb," he said, noting that significant risks remain.
While Chinese consumption has risen, he said rising internal debts remained a risk to the Chinese economy that could impact future copper demand.
But the biggest risk to global copper demand was that posed by protectionism and the risk of a global trade war, following the election of US President Donald Trump last November.
With the improvement in copper prices, Antofagasta is now preparing to develop major projects at its Chilean operations that it continued to advance through the engineering stages during the downturn.
Following the completion of its new Antucoya mine last year and the Encuentros oxides deposit which enters production later this year, the company is preparing to approve a $1.1 billion investment at its Los Pelambres mine later this year.
The capacity expansion will compensate for harder ore at the mine, allowing it to produce 400,000 mt/year of copper in concentrate from 2020, up from 355,400 mt in 2016.
The other project in the pipeline is a second concentrator at its Centinela complex, a $2.7 billion investment which would add 140,000 mt/year of concentrate production.
But Arriagada said the traditionally conservative company felt no compulsion to accelerate its investment program in the expectation of a tighter copper market.
"We do not want to embark on two big projects at the time because of balance sheet commitment and execution capability so we want to do them sequentially," he said.
Work on the new concentrator would not therefore begin until the Pelambres expansion is completed, he added.
