Rio Tinto Copper CEO: Copper Market to See Deficit by 2020s

Base Metals Investing

As supply lessens and demand increases, Rio Tinto’s CEO of copper and diamonds predicts a deficit on the horizon for the market.

Copper will see a supply deficit in the 2020s as emerging technologies that rely on the metal become more prevalent, according to Arnaud Soirat, CEO of copper and diamonds at Rio Tinto (LSE:RIO,ASX:RIO,NYSE:RIO).

Despite its 31-percent price rise last year, copper has struggled to keep going strong. However, the era of electric vehicles and similar technologies is still on the horizon, meaning a shift in copper supply and demand is also around the corner.

“Tightening supply and solid demand are combining to produce a positive pricing environment,” Soirat told a copper conference in Santiago, Chile this week. “We anticipate global market supply and demand will keep close to balance in 2019 and 2020.”

As technological advancements continue, major copper-producing countries such as Chile are soon to see increased pressure to meet demand. “In this transition, copper and the co-products it makes possible will be more important than ever,” Soirat said.

While Rio Tinto has an extension in the works for its Mongolian copper mine, Oyu Tolgoi, the company has previously predicted that the copper market will see a deficiency by the mine’s planned operational date of 2020. Few other major new projects are in the works.

In fact, consultancy CRU Group told Reuters that it does not feel confident that there will be enough copper projects in the pipeline to effectively meet demand over the next 16 years, as current production rates from existing mines slowly ebb.

Unless new investments arise, existing mine production will drop from 20 million tonnes to below 12 million tonnes by 2034, in turn leading to a supply shortfall of more than 15 million tonnes, CRU Group analyst Hamish Sampson told the news outlet.

Copper prices were trading at $3.13 per pound as of 11:00 a.m. EST on Tuesday (April 10). Prices are down 4.37 year-to-date, but have increased 19.3 percent over the past year.

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Securities Disclosure: I, Olivia Da Silva, hold no direct investment interest in any company mentioned in this article.

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