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Analysis

Copper, Zinc Demand Continues Strong Despite Global Slowdown

Wed, 10/16/2019 - 17:42

Copper is an essential element for the manufacturing of electrical equipment, such as wiring and motors. An excellent conductor of heat and electricity, it also has applications in construction and industrial machinery. Despite the global economic slowdown triggered partly by tariff exchanges between China and the US, demand for copper is expected to keep growing in the short and medium terms. In line with this, CAMIMEX anticipates copper prices to rise in 2020: a deficit in the supply of refined copper of approximately 131,000 tons is partially responsible. In the medium term, the same organization expects a structural deficit in the metal’s availability. While production peak will be reached in 2022, future supply will mainly depend on current projects. But finding and developing new alternatives to the metal’s present provision should be a priority, particularly as the electrical vehicle industry will see significantly increased demand in the next 10 years.
As reported by the US Geological Survey, Mexico is the ninth-largest copper producer in the world, reaching 760,000 tons in 2018. Of this amount, 73.3 percent was produced by Grupo México, whose Buena Vista del Cobre mine remains the national industry’s undisputed crown jewel. For its part, Cobre del Mayo has exciting plans for its mine in Piedras Verdes, Sonora. In a matter of nine years, the company has expanded the ROM project it originally encountered into Mexico’s third-largest copper operation. A crushing plant was installed, which capacity has been expanded to 12,000t/d, and by 2H19 another expansion, doubling capacity, is to be completed. The gradual development of this project is set to optimize Mexico’s copper portfolio. “Our current expansion will increase the amount of material we can crush, lowering our unit costs. We have outstanding reserves and there is potential to expand our copper production,” says Jim Healy, Director General of Cobre del Mayo.
The second-most important base metal produced in Mexico is zinc. According to the International Lead and Zinc Study Group, the country was the sixth-largest producer in 2018, after India and the US. Mexico’s production accounted for 5 percent of the 12.9 million tons produced that year. The aforementioned organization expects a hike of 7.7 percent in global mine production in 2019, driven by several major projects around the world entering full production. Even so, a deficit in supply is expected in the short term. With respect to prices, the IMF anticipated a decrease to US$2,683 per ton in 2019, from US$2,798 in 2018; its forecast for 2020 is US$2,581 per ton. Fitch Ratings goes even further, placing its outlook at US$2,500 per ton in 2020. Nevertheless, as Mining Technology notes, global zinc supply is expected to grow from 2019 to 2022 at a compound annual growth rate of 3.8 percent, reaching 15.7 million tons. Parallel to this process, the gap between supply and demand is projected to narrow, and eventually the market will move into surplus in 2022.