VCheng
ELITE MEMBER
- Joined
- Sep 29, 2010
- Messages
- 48,460
- Reaction score
- 57
- Country
- Location
I found this article relevant given reports of large Pakistani reserves of this important metal. Whatever reserves are present, if developed properly, copper can give Pakistan an economic boost.
Copper: Red bull | The Economist
Copper
Red bull
The worlds most informative metal
Sep 24th 2011 | from the print edition
The locked doors of a public library in West Norwood, a drab part of south London, are an unlikely economic indicator. But a plaintive note explaining the closurethieves have stripped the roof of its copper cladding, letting in rain on the books belowhints at profound changes to the global economy. And copper is the metal most intimately affected.
Police in London note a close correlation between thefts like the one in West Norwood and global commodities markets. Around the world, copper crimes have soared along with its price. Filched cables have reportedly caused train delays and stalled repairs to telecoms networks. Heating boilers, pipes and air-conditioners have been ransacked. Criminals are clearly sensitive to the gyrations of the global economy. Copper is reckoned to go one better: it earned its moniker of Dr Copper for its supposed ability as an economic forecaster. The metals price movements are widely believed to prefigure shifts in the world economy.
The theory looks compelling. Coppers excellent conduction of electricity and heat means that it is used not only to cable and pipe the globe. An average car contains over 25kg of copper; electronic gadgets, from PCs to mobile phones, use copper for wiring and contacts. Its ubiquity means that rising demand should provide an early indication of an uptick in manufacturing and construction. Copper sagged in the early stages of the credit crisis, for example, and then started to pick up at the end of 2008, some months before the stockmarket began to rebound. Such prescience is now cause for concern. As fears of a double-dip recession mount copper has slumped to a ten-month low.
Copper is less sensitive to the ups and downs of rich-world economies than it was, however. For that, blame China. In 2003, before the full weight of Chinas tearaway economy became apparent, copper traded at below $2,000 a tonne. It hit $10,000 a tonne earlier this year, before falling back to $8,400 a tonne now. Such is the scale of Chinas urbanisation and industrialisation, both of which require plentiful supplies of the metal, that it consumes at least 40% (and by some reckonings 50%) of global output of around 16m tonnes in 2010. Global demand for copper is expected to rise by more than 40% to 27m tonnes by 2020.
Copper is not alone in feeling the effect of China on demand. But the metal is something of a touchstone on the supply side, too. Nearly a decade into Chinas rampant commodity-buying spree the bosses of the big mining companies are starting to talk about the growing problems getting all manner of minerals out of the ground. Copper best illustrates the issues they face.
There are few sizeable new deposits in coppers heartlands in North and South America and Australia. Annual production at Escondida in Chile, the worlds biggest copper mine, peaked at around 1.5m tonnes in 2007. The only new mine that comes close is Rio Tintos Oyu Tolgoi in Mongolia, which will start commercial production in 2013 and may eventually produce half that amount.
New copper supply is going to be increasingly dependent on smaller mines that are deeper underground and have lower ore grades. As Gayle Berry of Barclays Capital notes, these mines will also mainly be in riskier parts of the world, such as Africas copper belt, stretching across Zambia and Congo. The Chinese have a mine in Afghanistan. The lack of vital infrastructure such as roads, railways, power and water, and the ever-lengthening process of getting mining permits, will make the newer mines far more costly.
This bodes ill for future supply. Lead times for new projects, once four to five years, have crept up to between seven and eight years. Wringing extra copper out of existing mines has its difficulties too. Miners dig in the better parts of mines first. As older mines get deeper, ore grades decline and extraction becomes more expensive. The disruption rate (the amount of promised copper that fails to materialise), about 2% five years ago, is now as high as 8%, according to Andrew Keen of HSBC. These difficulties and the buoyant price of iron ore and coal, which can be mined far more easily, have led the worlds biggest diversified miners to favour those commodities when allocating investment.
Copper prices are also likely to stay high because of the lack of good substitutes. West Norwood librarys roof repairs are dragging on because of arguments over a suitable replacement for the copper, for instance. Michael Widmer of Bank of America Merrill Lynch reckons that the current price is probably high enough to spur serious efforts to find alternatives. But most of the easy substitution has already been done. The worlds plumbers have switched to plastic piping where they can. Chinese boffins have engineered air-conditioning units with (bulkier) aluminium heat exchangers.
Aluminium can also be used for electric cables but much more has to be used for the same effect. It is no use for increasingly miniature electronic devices. And the connections are nowhere near as good as copper. A drive to wire 2m American homes with aluminium in the 1970s led to several burning down because of sparking from poor connectionsbuilding codes now ban aluminium from most domestic wiring. Many utilities are simply not interested in changing their cabling: it would require all their engineers to retrain.
In the short term copper prices may drift lower as growth slows in America and Europe. But high prices have encouraged destocking in China and those stocks will eventually need replenishing. Over the long term the fundamentals have most analysts convinced that high prices are here to stay. Dr Copper may no longer be as good at taking the temperature of Western economies. But it speaks volumes about the effect of China on the world.
from the print edition | Finance and economics
Copper: Red bull | The Economist
Copper
Red bull
The worlds most informative metal
Sep 24th 2011 | from the print edition
The locked doors of a public library in West Norwood, a drab part of south London, are an unlikely economic indicator. But a plaintive note explaining the closurethieves have stripped the roof of its copper cladding, letting in rain on the books belowhints at profound changes to the global economy. And copper is the metal most intimately affected.
Police in London note a close correlation between thefts like the one in West Norwood and global commodities markets. Around the world, copper crimes have soared along with its price. Filched cables have reportedly caused train delays and stalled repairs to telecoms networks. Heating boilers, pipes and air-conditioners have been ransacked. Criminals are clearly sensitive to the gyrations of the global economy. Copper is reckoned to go one better: it earned its moniker of Dr Copper for its supposed ability as an economic forecaster. The metals price movements are widely believed to prefigure shifts in the world economy.
The theory looks compelling. Coppers excellent conduction of electricity and heat means that it is used not only to cable and pipe the globe. An average car contains over 25kg of copper; electronic gadgets, from PCs to mobile phones, use copper for wiring and contacts. Its ubiquity means that rising demand should provide an early indication of an uptick in manufacturing and construction. Copper sagged in the early stages of the credit crisis, for example, and then started to pick up at the end of 2008, some months before the stockmarket began to rebound. Such prescience is now cause for concern. As fears of a double-dip recession mount copper has slumped to a ten-month low.
Copper is less sensitive to the ups and downs of rich-world economies than it was, however. For that, blame China. In 2003, before the full weight of Chinas tearaway economy became apparent, copper traded at below $2,000 a tonne. It hit $10,000 a tonne earlier this year, before falling back to $8,400 a tonne now. Such is the scale of Chinas urbanisation and industrialisation, both of which require plentiful supplies of the metal, that it consumes at least 40% (and by some reckonings 50%) of global output of around 16m tonnes in 2010. Global demand for copper is expected to rise by more than 40% to 27m tonnes by 2020.
Copper is not alone in feeling the effect of China on demand. But the metal is something of a touchstone on the supply side, too. Nearly a decade into Chinas rampant commodity-buying spree the bosses of the big mining companies are starting to talk about the growing problems getting all manner of minerals out of the ground. Copper best illustrates the issues they face.
There are few sizeable new deposits in coppers heartlands in North and South America and Australia. Annual production at Escondida in Chile, the worlds biggest copper mine, peaked at around 1.5m tonnes in 2007. The only new mine that comes close is Rio Tintos Oyu Tolgoi in Mongolia, which will start commercial production in 2013 and may eventually produce half that amount.
New copper supply is going to be increasingly dependent on smaller mines that are deeper underground and have lower ore grades. As Gayle Berry of Barclays Capital notes, these mines will also mainly be in riskier parts of the world, such as Africas copper belt, stretching across Zambia and Congo. The Chinese have a mine in Afghanistan. The lack of vital infrastructure such as roads, railways, power and water, and the ever-lengthening process of getting mining permits, will make the newer mines far more costly.
This bodes ill for future supply. Lead times for new projects, once four to five years, have crept up to between seven and eight years. Wringing extra copper out of existing mines has its difficulties too. Miners dig in the better parts of mines first. As older mines get deeper, ore grades decline and extraction becomes more expensive. The disruption rate (the amount of promised copper that fails to materialise), about 2% five years ago, is now as high as 8%, according to Andrew Keen of HSBC. These difficulties and the buoyant price of iron ore and coal, which can be mined far more easily, have led the worlds biggest diversified miners to favour those commodities when allocating investment.
Copper prices are also likely to stay high because of the lack of good substitutes. West Norwood librarys roof repairs are dragging on because of arguments over a suitable replacement for the copper, for instance. Michael Widmer of Bank of America Merrill Lynch reckons that the current price is probably high enough to spur serious efforts to find alternatives. But most of the easy substitution has already been done. The worlds plumbers have switched to plastic piping where they can. Chinese boffins have engineered air-conditioning units with (bulkier) aluminium heat exchangers.
Aluminium can also be used for electric cables but much more has to be used for the same effect. It is no use for increasingly miniature electronic devices. And the connections are nowhere near as good as copper. A drive to wire 2m American homes with aluminium in the 1970s led to several burning down because of sparking from poor connectionsbuilding codes now ban aluminium from most domestic wiring. Many utilities are simply not interested in changing their cabling: it would require all their engineers to retrain.
In the short term copper prices may drift lower as growth slows in America and Europe. But high prices have encouraged destocking in China and those stocks will eventually need replenishing. Over the long term the fundamentals have most analysts convinced that high prices are here to stay. Dr Copper may no longer be as good at taking the temperature of Western economies. But it speaks volumes about the effect of China on the world.
from the print edition | Finance and economics
