Global copper output growth still far behind demand

* Companies boost copper output on average 4 pct in Q3

* Supply-side response too little, too late

* China/emerging-market demand to continue to outpace

By Chris Kelly

NEW YORK, Nov 8 (BestGrowthStock) – Some of the world’s top copper
miners raised production by 4 percent last quarter, a Reuters
analysis based on earnings results so far showed on Monday,
suggesting growth may fail to meet booming global demand.

The companies reported represent about one-tenth of global
mined copper production. Codelco [CODEL.UL], which accounts for
around 11 percent of the world’s mined copper, has yet to
report third-quarter results. The company’s first-half output
rose 2 percent to 799,000 tonnes from year-earlier levels.

Slow to bring capacity back on line after 2008’s economic
downturn, some of the largest copper producers turned more
aggressive in the quarter, reopening idled mines and ramping up
production in response to a China/developing world-led global
economic recovery.

“People were paralyzed in 2008-2009 when copper (CMCU3: ) got
below $3,000 per tonne. They deferred things just to see how
the situation would turn out,” said Edward Meir, metals analyst
with MF Global.

“In the last six months to a year, they have been
reasonably reassured that the growth story, at least in the
emerging markets, is still intact.

“You’re seeing a bit more of an aggressive supply-side
response,” he said.

(Graphic: http://r.reuters.com/xyk83q )

Catherine Virga, senior base metals analyst with CPM Group
in New York, agreed, but questioned the strength of that
supply-side response.

“Mines are going to continue to strive to bring
improvements on the supply side, but it’s just now a question
of whether or not that’s going to be able to outpace demand,”
Virga said.

Operational constraints and cutbacks initiated in 2009 are
projected to constrain mine production to 16.2 million tonnes
in 2010, the International Copper Study Group (ICSG) said.

Looking to 2011, increased economic activity is expected to
boost end-user demand for the metal much faster than
production, pushing the global market deeper into deficit of
about 400,000 tonnes.

“The significant level of production disruptions from
project delays, technical problems, and labor and political
unrest that has become the norm in recent years is expected to
continue to reduce output,” ICSG said in a recent forecast.

Chilean disruptions are already having an impact, boosting
the metal near record highs at $8,940 per tonne in London and
above $4.00 per lb in New York.

A work stoppage at the world’s No.3 copper mine, Chile’s
Collahuasi, entered its fourth day on Monday as employees
argued over wages with owners Xstrata (XTA.L: ) and Anglo
American (AAL.L: ). [ID:nN08181304]

Replacement workers have helped maintain normal mine
output, but industry sources said production could be affected
if the strike extended beyond one week. [ID:nN05111737]

(Graphic: http://r.reuters.com/zur52q )

“These miners are very attuned to where the price of copper
is. They’re going to hold out for much more sizable increases
in pay than what they have in the past,” said Anthony Young, an
analyst with Dahlman Rose.

“Copper has this labor situation and will possibly have
other labor situations on the horizon … not necessarily
anything of this magnitude, but I think you are going to see
other work stoppages, given the high market prices,” he said.

The demand side of the equation could receive an additional
boost from growing interest in copper exchange-traded products
(ETP), analysts said. [ID:nN27567082]

A copper ETP could take a large chunk of the metal out of
an already tight market. Analysts expect the copper market,
estimated at 19 million tonnes, to be balanced or see a small
deficit this year. [MET/POLL]

With few new projects expected in 2011, incremental
increases in supply to offset any shortfalls at other projects
are limited and should continue to lag demand, the analysts
said.

“New mine development is a long process … it’s a 10-year
project,” Justin Lennon, an analyst with Mitsui Bussan
Commodities, said. “The demand out of China just overwhelmed
planned and scheduled (production) growth in the copper
industry.

“The rise in third-quarter production is too little, too
late,” he said.
(Editing by Dale Hudson)

Global copper output growth still far behind demand