Industry Trend Analysis - Copper To Experience Limited Rebound Beyond 2016 - APR 2016
BMI View: US copper production will continue to decline in 2016, as weak prices will drive miners to curb output and divest high-cost assets.
US copper production will contract in 2016 on the back of persistently weak copper prices. Miners will continue to cut jobs, reduce capacity and sell non-core assets in an effort to remain operationally viable within the weak price environment. For instance, in March 2016, Rio Tinto Kennecott announced plans to lay off 200 employees at the Bingham Canyon copper mine in Utah due to declining copper prices. Bingham Canyon, one of the largest US copper mines, produced just 92.0 thousand tonnes (kt) in 2015, compared to 204kt in 2014, due to ongoing reconstruction of the north-east wall damaged by a landslide in 2013.
Furthermore, on February 15, Freeport-McMoRan sold a 13.0% stake in the Morenci copper mine in Arizona to minority owner Sumitomo Metal Mining for USD1.0bn. In Q315, Freeport announced the suspension of operations at the Miami mine, the planned shutdown of the Sierrita mine, and capacity reduction at the Tyrone mine to be implemented in 2016. In Q415, Grupo Mexico subsidiary ASARCO announced the closure of the Hayden copper smelter in Arizona.We forecast US copper production to contract by 5.3% in 2016, and increase marginally from 1.3 million tonnes (mnt) in 2016 to 1.4mnt by 2020. This represents an average 1.0% annual growth rate during 2016-2020, compared to an average 4.2% during 2011-2015.
|Muted Growth Beyond 2016|
|US - Copper Mine Production (LHS, '000 tonnes) & Growth (RHS, % y-o-y)|
|e/f = BMI estimate/forecast. Source: BMI, USGS|