Santiago, Chile 03/04/2016 - Cesco Week, now firmly established as a key annual event in the global copper industry, officially kicks off on Monday but FastMarkets' reporters have been in Santiago for several days collecting quotes from market experts.
CESCO SENTIMENT
“There are fewer people here this year. It is hard to justify the expense to travel to Chile in a tough price environment. There is definitely a sense that things are smaller.” – Analyst
“Will Cesco Chile continue to be a must attend? It’s uncertain as the focus has shifted to Asia. With Cesco now in Shanghai and taking place at key negotiating times, it seems that the glory days for Chile are ending.” – industry consultant.
“This is a a year where people are going to be very conservative. If I had to label things, I would say Cesco Week will be neutral to slightly negative - a Canadian miner
"The mood was bleak at the start of the year but everyone has tightened their belts. People have had time to adapt and are now getting on with things." - a trader
"I like that Cesco takes place when the market is quiet. I can concentrate on relationships because I don't have to agree business deals. Relationships in Chile is what makes business." - a miner
ON THE LOW COPPER PRICE
“The $5,000 [per tonne] level is now seen as good. Will things get worse? It is tough to tell. We may see further downside but most likely we will just grind along for the time being. But the longer prices are lower, the more it hurts miners.” – an analyst
"The price is low, but I don't think it will get worse. A currencies [in most mining regions] are underperforming, which allows producers to keep running even when copper prices are low." - a mining specialist
"We are at a level where things are tough but I think the worst is behind us. I do not think it will go much lower, there is alway an upside even when things are bleak." - a logistics expert
MINERS IN SURVIVAL MODE
“Right now everyone in the industry is in survival mode - they are just trying to make the best of a bad situation.” – Canadian miner
“If there's no improvement then the landscape of the mining industry could totally change. CapEx is being restricted and miners are reluctant to cut production. If prices continue to bump at these levels or lower, some big names could be wiped off the map.” – an analyst
"People are already making small decisions on a daily basis that will eventually add up to big cuts. For example, I'm sure there plenty of mines that aren't going to strip steep faces because it's too costly. Cost is the number one factor when developing a mine." - a miner
ON METAL EXCHANGES
“Copper is a metal where there is a larger amount of non-physical participation and we welcome that. We do not think that it pushes prices around in a way that different market users may not like. Actually, we think what happens improves liquidity and therefore narrows bids and offers and provides more trading opportunities.” Stuart Sloan, LME COO.
ON RAMPING UP PRODUCTION IN PERU
Peruvian copper concentrate output increased by 23 percent to 1.7 million tonnes in 2015, according to the country's Ministry of Energy and Mines. This was due to the ramp up of production at Chinalco’s Toromacho mine and Glencore’s Antapaccay mine.
And in 2016, MMG Limited’s Las Bambas will add 250,000-300,000 tonnes in new concentrate output, while Freeport-McMoRan is expanding the milling operations at its Cerro Verde mine. But some worry that this mining boom will test the country's infrastructure.
"Production in Peru is doing really well but a lot of mines are ramping up output at the same time. And they're all sending their concentrates to the Port of Matarani. That's going to put a lot of stress on those road and rails. I could envision there being major issues with the local communities if those trucks cause congestion and dust." - a miner
"The [Peruvian local] communities will continue to be an issue – one that is made more acute by the upcoming election. And there's a shortage of truck drivers. These are growing pains but they will be solved over time." - South American miner
ON THE COPPER TC/RC BENCHMARK
“I really think the benchmark needs to die. The main issue is the China Smelter Purchasing Team (CSPT), which has become much better organised over the last couple of years. And that’s the problem - they are are now much better placed to play with price structure.” – a miner
“The benchmark can lead to laziness in the market - there is a lot more to our business than just TC/RCs. There’s also payment terms, penalty items, logistical costs and other value propositions. I do not think this sole focus in the TC/RC benchmark is a good thing" – copper miner
ALWAYS SOME CONTRARIANS
"Chinese demand is going to surprise - we think analysts will start revising their forecasts to the upside after the next set of data is released. The stimulus is starting to have an impact. Also, they just finished a full year of destocking. We're of the belief that they have already started a restocking cycle. We saw a pick up in activity in March."