September 9, 2017 4:59 pm JST

Copper solid on China, India demand, electric cars: Antofagasta CEO

Head of Chilean miner cites Asian geopolitics and US protectionism as risk factors

NAOYUKI TOYAMA, Nikkei staff writer

Miners watch from a lookout point at the La Escondida copper mine, the world's biggest copper mine, near Antofagasta, Chile on March 31, 2008. © Reuters

SANTIAGO, Chile -- Copper prices will not slide below $2.50 per pound anytime soon thanks to a stable Chinese economy, Indian growth and the spread of copper-hungry electric vehicles, said Ivan Arriagada, CEO of Antofagasta, a major Chilean copper mining company headquartered in the U.K.

The metal is now trading at about $3.10, up about 50% from its 2016 low.

China, the world's biggest consumer of copper, is a big reason for what Arriagada called his "favorable outlook for copper prices and the copper market."

"We continue to see favorable demographics [in China]," the CEO said. The country's ongoing urbanization, he said, "means more housing, more consumer goods, more investment in electrical grids."

He sees India as the most promising market after China, and one with plenty of room to grow. "Copper consumption in India is around 2 million tons, compared with China's 9 million tons," Arriagada said. However, "India may become more important ever, because copper demand there is growing at over 8% per year," he said.

The CEO also cited the growth of "clean energy and transport" as another favorable factor. "Renewable energy and electric vehicles will have a very important impact on copper demand," Arriagada said, adding that, "While a conventional car uses 25kg of copper, an electric car uses around 80kg."

China is heavily promoting electric vehicles, and France and the U.K. have announced plans to prohibit the sale of gasoline cars by 2040. Arriagada said the spread of electric vehicles is happening faster than expected and will have a huge positive impact on copper demand.

Supply-side restrictions

Also helping push up copper prices are restrictions on the supply side. "The pipeline [for new mining projects] remains very dry," Arriagada said.

The company kicked off full-capacity production at Chile's Antucoya mine in July in cooperation with Japanese trading house Marubeni. But other than that, "There are not many new projects," Arriagada said. He said that project is the only new one coming to the market this year, and that one is in the works for next year.

Despite his upbeat outlook, copper prices still remain more than 30% below their peak level. "We're actually reducing manpower," said Arriagada, adding that the company has downsized its workforce over the past two to three years to improve its balance sheet.

He said information technology has played an important role in that process. Operations that used to be managed separately at each mine have since been consolidated. Those tasks, Arriagada said, are now handled through a central hub, "avoiding duplication and also removing people from site."

"We think innovation can play a very important role in improving the future of mining," the CEO said. He said the company is "building a road map to incorporate new information technology," which involves "a remote operation center ... automation and the use of data analytics."

As for possible risk factors, Arriagada cited geopolitics -- particularly in Asia -- and the rise of U.S. protectionism. He said he would continue watching to see how the commodities market will be impacted by the protectionist moves led by U.S. President Donald Trump and the situations in the South China Sea and North Korea.

Marubeni Corp.

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