Market analyst Fitch Solutions, in its latest industry report, said it was bullish on higher copper prices and demand for copper in the medium to long term, and global copper production is expected to remain strong in the coming years as many new projects and expansions come online.
Fitch forecasts that global copper production will grow at an average annual rate of 2.8 percent between 2022 and 2031, with annual production rising from its forecast of 24.6 million tons in 2022 to 31 million tons in 2031.
Leading project developers are mainly large mining companies, including BHP Billiton and Teck Resources, which have been drawn to Chile, the world's largest copper producer, because of its infrastructure and social stability.
Fitch's forecast for 2022 global copper production Growth is driven by an increase in BHP's Spence Growth Option project.
As of May 2022, the Spence project is gradually ramping up capacity and Spence is expected to average copper production of 300,000 mt/y in its first four years of operation.
Growth beyond 2021 will also benefit from increased projects and some operational reactivation at Escondida, the world's largest copper mine. Fitch expects output to be lower than usual by fiscal year 2022 (ending June 2022) due to current workforce levels.
Meanwhile, Tektronk Resources' Qubrada Blanca Phase II project is expected to begin production in the second half of 2022. The development of the project was delayed for five to six months due to the pandemic and has now been restarted. The company estimates copper production for the first five years will average 286,000 tonnes per year. Tektronix is also considering the third phase of the project, which could significantly increase capacity in the long term.
In May 2021, Chile's state-owned Codelco, the world's largest copper producer, announced that it was ready to start construction on the $1.38 billion Rajo Inca project. Through the project, the company intends to overhaul its El Salvador mine and extend the life of the mine by 47 years.
Codelco reports that it plans to reach 90,000 tons of production in the first half of 2023. The project is part of Codelco's 10-year, $40 billion plan to upgrade aging mines; Fitch noted that the move will contribute to the expected growth in copper production.
The U.S. has a high ratio of new projects (39) to in-production projects (15), which meets the size criteria of Fitch's global mining database, and Fitch analysts say many key projects are likely to come on stream before 2031.
Copper production growth is likely to accelerate in the five years 2027 to 2031 as these projects expand and other new projects come on stream, Fitch said, although it noted that the current Chilean government's environmental review of projects could cause some investment to be delayed.
Fitch predicts that optimism about copper prices will encourage U.S. project companies to push ahead with projects.
Fitch expects copper prices to rise over the next few years because of positive demand prospects. As prices rise, the economics of copper mining projects will become more attractive to investors, who in some cases will also face relatively high production costs.
However, the mining industry found that the recent period of time, copper prices continued to decline, as of July 11 afternoon close: Shanghai copper closed 58480 yuan/ton, down 2.03%; LEM Copper was last quoted at $7,649 / ton, down 2.69%. Overall bearish sentiment is evident, with copper prices down more than 20% since the beginning of June.
