Santiago, Chile 06/04/2016 - The pace substitution of aluminium and plastic for copper should slow as many of the easy applications have already been implemented, Mark Lovett, secretary-general of the International Wrought Copper Council (IWCC), said in an interview.
“Substitution is always an issue but the low hanging fruit has been picked and this has made substitution harder,” Lovett said on the sidelines of Cesco Week here.
Previously there had been a lot of plastic substitution, particularly in the plumbing industry, while aluminium had also been used instead of copper in wire-harnessing in the automotive sector.
“[Also], the relative price of raw materials has narrowed so the substitution issues we had a few years ago have eased,” he added.
Meanwhile, the refined copper market is expected to be broadly balanced in 2016 with the IWCC expecting a deficit of 140,000 tonnes.
China's demand growth is expected to increase by 2.5 percent – which is lower than previous years but not an unreasonable amount, he said.
“We don’t envision anything spectacular in the medium-term, but 250,000 tonnes or so is still a substantial amount," Lovett said.
Europe, meanwhile, is not doing “too bad” but enormous growth potential is unlikely.
“It is a mature economy and this means small growth – but again we still see growth. It is a similar situation in North America," he said.
The demand ultimately will be driven by the end user and dependent on infrastructure investments, but there is still a good appetite for the construction and automotive sectors.
Still, oversupply remained an issue in this low price environment - copper prices are trading around $4,783 and the lowest in around one-month.
But, miners are more flexible to react to a downturn than in previous years and this is helping to keep producers above water.
This flexibility was attributed to the progress in technology which allows miners to have better controls and “switch tactics” quickly.
And, while miners have been increasingly pessimistic about a recovery in the sector – most are not forecasting an upturn until 2018 at the least – Lovett said the outlook may not be so bleak.
“Miners have moved from being over-optimistic in the peak prices to over-cautious now – I think that they may be over-stating how bad things have been," he concluded
(Editing by Tom Jennemann)