(Reuters) - Chilean miner Antofagasta Plc expects a volatile copper market and a slight supply shortage this year, its chief executive said, adding that any unexpected production shock would push prices higher.
Speaking at the CRU World Copper Conference in Santiago, Antofagasta chief executive Ivan Arriagada said fears ofa global recession remained due to the war in Ukraine and financial uncertainty, but he expected a "soft landing" as long as Chinese demand remained stable.
"The current supply and demand fundamentals support the price levels we are seeing today," Arriagada said. The market will be more balanced in 2024 and 2025 as new production resources will come online, he added.
The price of copper, used in power and construction, has fallen in recent months to about $8,960 a ton. That is still well above pre-pandemic levels of about $6,000 a tonne, but down from last year's record $10,845.
"We expect a slight shortage in 2023, with very limited stocks," Arriagada said. He predicted that price fluctuations would be sensitive to "any supply shocks" due to worker strikes or other operational challenges.
He also predicts that the supply gap will widen from 2026, largely due to the growing demand for copper from the energy transition.
Arriagada said its $3.7bn Centinela mine improvement plan was being finalised and would then need board approval, but added that this depended on the clarity of the mining royalties bill currently being debated in Chile's Congress.
"This is a huge investment and also a production cycle of more than 20 years," Arriagada said.
"So it's very important to understand the fiscal situation we're investing in."
Antofagasta and others have called for more dialogue on the controversial mining royalties bill, saying it would hurt the country's competitiveness with other mining countries such as Australia or Peru.
Litigation to recover the company's license for its Twin Metals project in the United States could take several years, but the project remains an attractive asset, Arriagada said.
He noted that the mining trading market had become "more active", largely driven by the positive outlook for copper. However, he said any acquisition by the company would have to be weighed against plans to develop assets it already owns.
Arriagada also said its desalination plant at the Los Pelambres mine is expected to start supplying water in May and return to full capacity in July.
