Fitch Ratings recently reported that copper mining companies in Latin America are shielded from the global cost curve to be able to handle a cycle of lower copper prices that currently stand near $2.40 per pound.
In 2014, copper prices steadily decreased from $3.10, reflecting a modest surplus that stood at approximately 200,000 tons. That surplus is expected to last through 2016, with 21 million tons of copper mined each year.
The midcycle price assumption for copper for 2015 and 2016 from Fitch’s estimate amounts to $2.72 per pound and rises to $2.95 per pound in 2017 and later years. This shows an expected return to a copper deficit.
Experts say the lower copper price is aggravated by an improved U.S. dollar as well as China’s housing market slowdown.
Fitch has stated that the low cost position of Latin American copper miners will guarantee that their standing remains steady and profitable throughout the next two years. The companies are projected to continue profiting even when the prices start to show a supply dearth, which is supported by streamlined cost structures, healthy mineral reserves and higher low-cost volumes.
