By Matthew Craze and James Attwood
Sept. 11 (Bloomberg) -- Codelco, the world’s largest copper producer, will boost output for the first time in five years as an $11 billion investment program revamps aging mines.
Production will increase by “at least” 120,000 metric tons, or about 8 percent more than last year’s 1.55 million tons, as the company produces for a full year at the Gabriela Mistral mine, Santiago Gonzalez, Chilean Mining Minister and chairman of state-owned Codelco, said in an interview.
Santiago-based Codelco is developing new deposits as metal runs out at mines including century-old Chuquicamata. Four years of falling output at Codelco, which produces about a 10th of the world’s copper, helped prices surge sixfold between 2003 and May 2008, when futures for the metal used in plumbing and wiring rose to a record $4.2605 per pound.
New Codelco supplies “will increase the likelihood of a medium-term pullback” in prices, Matthew Zeman, a trader at LaSalle Futures Group in Chicago, said in an interview yesterday. “That will add a little fuel to the fire.”
Zeman predicts prices may decline to $2.50 a pound. Copper futures fell 4.75 cents, or 1.6 percent, to $2.8765 a pound in New York yesterday as inventories rose in London Metal Exchange- monitored warehouses.
Stockpiles tracked by exchanges in London, New York and Shanghai have risen 17 percent this year to 452,541 tons as of yesterday, data compiled by Bloomberg showed. That was the highest since May 11.
Purchases by China, the world’s largest consumer, tumbled for a second month as stores of the metal rose. Imports plunged to 325,098 tons in August, the customs office said today. That’s 20 percent down from a month ago, according to Bloomberg data.
Gabriela Mine
Codelco’s production rose 15 percent in the first half of 2009 as the Gabriela Mistral mine boosted the company’s total.
Last year, Codelco’s contract workers went on strike at three of the company’s mines and mudslides curbed output at the El Teniente mine.
“If these events don’t reoccur then production should increase,” Gonzalez said yesterday in Santiago.
Chile’s total copper output may increase by between 3 and 5 percent this year because of gains at Codelco, Gonzalez said.
Gonzalez also said the government may increase its estimate for this year’s average copper price to about $2.16 a pound, from $1.95 currently, on Chinese purchases of the metal used in power cables and electrical wire.
Copper prices have more than doubled in 2009 as imports by China climbed to a record in the first half.
To contact the reporters on this story: Matthew Craze in Santiago at mcraze@bloomberg.net; James Attwood at jattwood3@bloomberg.net
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