PARKES, Australia (Reuters) - The positive long-term outlook for copper remains intact, the head of Rio Tinto’s (RIO.AX) (RIO.L) copper division said on Friday, adding his voice to a chorus of mining executives reluctant to call time on the resources boom.
Debate over whether the decade-long bull run in commodities has ended has ramped up in recent days as China heads for the slowest pace of annual growth in more than a decade, driving down the prices of copper, iron ore and other raw materials.
Rio’s larger rival, BHP Billiton (BHP.AX) BLT.L, earlier this week shelved tens of billions of dollars in expansion plans due to soaring development costs, a high Australian dollar and an uncertain outlook, prompting Australia’s resources minister to say the boom was over.
“The long-term copper outlook remains positive,” Andrew Harding said at Rio’s 55,000 tonnes-per-year Northparkes copper mine in western New South Wales.
“Global growth in supply of copper is still challenged. People are still struggling to meet their production targets.”
Harding said that while Chinese copper demand faced a slowdown, the longer term was brighter and he had “no doubt” Beijing’s efforts to stimulate the Chinese economy would succeed.
“There is no doubt we are going to see an interruption in the near term but I’ve got complete confidence the long term is still completely intact,” he said, referring to Chinese demand.
“The reality is we have long term increasing demand driven by the people in China and, by a lesser degree, but ultimately more importantly, by India.”
Rio is forecasting production of 580,000 tonnes of mined copper and 300,000 tonnes of refined copper in 2012.
Global demand for copper is expected to outstrip supply this year, despite China’s slowing economic growth due to mine disruptions and a lack of new major copper projects.
BHP’s decision to shelve the $20 billion expansion of its Olympic Dam project, the fourth-largest known copper deposit in the world, will also tighten global supply from late 2013, according to analysts. The project in South Australia would have accounted for around 4 percent of global copper needs at its expanded peak.
Harding declined to comment directly on the impact of BHP’s decision, but acknowledged that it would affect prices if the market had been factoring in the lift in production.
“No-one can really predict what the price is going to be,” he added.
BHP postponed the expansion following a fall-off in benchmark international copper prices this year since reaching a peak of about $8,760 per tonne in February.
Prices have rallied in recent days, though remain well of their best this year. On Friday, the benchmark three-month contract at the London Metal Exchange stood at $7,620 a tonne.
Rio Tinto has allocated $16 billion in capital expenditure for this year, in contrast to the $22 billion planned by BHP.
Work at Rio’s Oyu Tolgoi copper mine in Mongolia was 94 percent complete and the first commercial production was expected by 2013, Harding said.
Oyu Tolgoi will produce 60,000 to 70,000 tonnes of copper contained in concentrate in its first year of production, with concentrate sold into the Chinese market, he added.
At the Northparkes mine, which is 80 percent owned by Rio Tinto and 20 percent owned by Japan’s Sumitomo (8053.T), second-quarter copper production rose by 16 percent compared with the same quarter of 2011 due to higher grades. (Editing by Ed Davies)