Next bonanza eludes copper miners and strains supply

Reuters reported that while China’s appetite for copper has enthralled the market in recent years some bulls said that there’s a supply side story that’s just as compelling the dearth of big new discoveries and dropping ore reserves at old mines.

According to research by the International Copper Study Group, Brook Hunt and Citi, painting a picture similar to the peak oil theory posited by Dr M King Hubbert in the late 1950s, the annual supply of copper may peak at around 20 million tonnes in 4 years and decline as demand rises. While Mr Hubbert’s Peak remains hotly disputed as technological advances and new frontiers keep oil output growing, there is mounting evidence to suggest copper may be at greater risk unless prices extend their rally to record highs and beyond.

Last year saw zero growth in world concentrates output, the lifeblood of the smelting and refining industry and London based GFMS sees a contraction of 1.6% or more this year the first annual decline since 2002.

The impact, if it occurs may be delayed: Most forecasters expect the copper market to be in surplus for the next 2 years to 3 years meaning total supply will outstrip consumption but that balance may shift as soon as 2012, exposing a mining industry that is struggling to keep pace with demand.

Steel Guru