Copper Industry

BIBLIOGRAPHY

The copper industry’s growth and prosperity are based on the metal’s inherent properties: an attractive appearance, high conductivity, good corrosion resistance, ability to alloy with other metals, and ease of working. While there are substitutes in specific uses, copper has entrenched and expanding markets in the electrical, electronic, and communications industries. Electrical and electronic products, including power cables, account for over one third of total usage, and construction, including wiring and water tubing, for a similar share. Transport industries use roughly one eighth of the total, industrial machinery and equipment nearly one tenth, and a wide range of consumer and other products the remainder. Global demand, which moves in step with capital expenditure, especially on construction and infrastructure, and with spending on automobiles and consumer durables, has increased from 3.7 million tonnes in 1960 to 6.8 million tonnes in 1970, 9 million tonnes in 1980, 10.9 million tonnes in 1990, 15.1 million tonnes in 2000, and 16.5 million tonnes in 2005. The annual average rate of growth is 3.1 percent, but with marked annual and geographical variations. The geographical center of demand has altered, with the most rapid increases in China, India, and the countries of the Asia-Pacific Rim. In 1980 the main markets were the countries of the European Union of 15 (30 percent), the United States (21 percent), the USSR (12 percent), and Japan (13 percent). By 2005 China had gained first place with 22 percent and the Asia-Pacific region had 14 percent. These increased shares were only partially offset by the collapse of demand in the former Soviet Union and its European satellites. In recent years demand has flattened out, or even fallen, in the United States (14 percent of the 2005 total), Japan (7 percent), and many of the European Union of 15 (20 percent) as their economic activity has become increasingly dependent on service industries and imported manufactures. Global turnover amounted to $21 billion in 2002 and $60 billion in 2005, with increased prices explaining most of the rise. World exports of refined copper metal accounted for 38 percent of production, worth almost $23 billion, in 2005.

Copper is priced on terminal markets, mainly the London Metal Exchange, and prices fluctuate with changes in the balance between supply and demand and with general economic and financial conditions. Whereas demand is cyclical, supply tends to be relatively inelastic as mines need to spread heavy fixed costs over as high an output as possible. The industry is a modest employer of labor, but is capital intensive at both the mining and refining stages. Volatile prices can be hedged in forward markets, but nonetheless create problems for producers and consumers alike. For example, the daily cash price fell from $3065/tonne on January 20, 1995, to a low of $1319/tonne on November 11, 2001, and rose to a high of $4650/tonne on December 28, 2005. The annual averages were $2934/tonne in 1995, $1560/tonne in 2002, and $3684/tonne in 2005. High prices both encourage substitution by other materials, and lead governments and labor to press for increased shares of profits. Weak prices inhibit exploration and new investment and may force the closure of higher cost mines.

The relatively strong growth of demand since the late 1980s has been facilitated by changes in the structure and nature of supply. Global mine production of copper was about 15 million tonnes in 2005, with the balance of demand for refined copper metal met from recycled materials. In many instances ores contain other payable products as well as copper, which can contribute considerably to mine profitability, and can influence production patterns. Because individual ore deposits are finite, continued spending on exploration and mine development is required merely to maintain output, let alone satisfy rising demand. Improved exploration techniques have partly offset the tendency for the average grade of copper ore to fall with the depletion of the richer and most accessible ore deposits. Also, technological improvements and rising mine size have tended to neutralize any impact of falling average grades on production costs. During the 1990s output became increasingly concentrated in large open-pit mines, where economies of scale more than offset the relatively low grades of contained metal in the ore. In 2004 the three largest mines produced about 2.5 million tonnes, or 15 percent of output. The annual copper output of the median mine grew from 75,000 tonnes in 1980 to 110,000 tonnes in 1990 and almost 200,000 tonnes in 2000. Larger mine sizes and falling average grades have greatly increased the local environmental impact of mining, as greatly increased volumes of waste and overburden have to be moved per tonne of recovered metal. Energy needs have also risen sharply. Most mines are located in relatively unpopulated areas, but social and community tensions can arise when they are developed near population centers, particularly where indigenous peoples are involved.

With the exhaustion of many small high-grade mines in Europe and parts of North America since the late 1980s, the geographical focus of output has shifted. That shift has been accompanied by changes in patterns of ownership. Whereas the shares of leading companies in total output have not altered significantly, the identity of those leading companies has changed markedly. During the 1950s, 1960s and early 1970s, many mines were wholly or partially nationalized, largely but not entirely in developing countries in accordance with the then-prevailing ethos of national ownership and control of mineral resources. In countries such as Chile, Zambia, and Zaire, foreign-owned mining companies had dominated, or even distorted, the local economy and exerted considerable political power, often fueling strong local resentment. Some nationalized U.S. companies, like Anaconda in Chile, blocked foreign aid and further investment in their former host countries in the 1970s. The greater part of U.S. mine output was acquired by oil companies during the 1970s. (For example, Anaconda Copper’s Chilean assets were nationalized in the 1960s and early 1970s, and its remaining assets were acquired by Atlantic Richfield in the late 1970s.) Subsequent decades have witnessed the complete withdrawal of the oil companies from copper production, and the privatization of copper projects in many countries. As of 2007 only Chile retains a significant state holding, through Codelco, but the company now coexists with privately owned companies and accounts for only 35 percent of a greatly expanded Chilean output, compared with about 82 percent in the early 1980s. Elsewhere, state-owned producers generally failed to invest sufficiently to sustain their output and remain competitive. U.S. mine output collapsed from 1973’s 1.6 million tonnes to 1 million tonnes in 1983, and it would have fallen further but for the oil companies’ investment and the application of new technology. Until the late 1970s most copper ore was crushed, concentrated by a variety of means, and then smelted and refined. Not all ores are amenable to processing by such means and oxide ores were often left untreated. Acid leaching, followed by solvent extraction and electro-winning (SX-EW) enabled the treatment of such ores and waste dumps, often at low costs, and these hydrometallurgical processes were suitable for many deposits in the Southwestern United States. In consequence, U.S. mine output expanded to 1.8 million tonnes in 1993 and 1.9 million tonnes in 1996, only to contract to 1.1 million tonnes by 2003, after prices had collapsed cyclically in the late 1990s.

Many South American copper ores are amenable to SX-EW processing and by 2004 the technique accounted for 18 percent of global mine output. One advantage is that the process produces saleable copper metal rather than intermediate products requiring further processing. Russian production fell with the collapse of the Soviet Union, and output fell during the 1980s and 1990s in Europe, Canada, Central Africa, and the Philippines. The number of producing countries has dwindled along with the number of mines. As of 2007 Chile accounts for 35 percent of global mine output, followed by the United States (8 percent), Indonesia (7 percent), Peru (7 percent), Australia (6 percent), and Russia (5.5 percent). The leading five copper mining companies supply 38 percent of global output, and the top ten 58 percent—similar shares to those of the mid 1970s. The five leading companies are Codelco (12.7 percent of 2004’s output), BHPBilliton (7.3 percent), Phelps Dodge (7.1 percent), Grupo Mexico (6.1 percent), and Rio Tinto (5.1 percent).

There is large global trade in ores and concentrates (28 percent of total mine output, and 34 percent of the output of concentrates) as not all copper is smelted and refined at, or near, the mine site. Some smelters and refineries continued to produce from imported raw materials when local mines were depleted, and some countries, like Japan, Korea, and China, deliberately fostered metal production for strategic or developmental reasons. The main countries producing copper metal are Chile (17 percent), China (15 percent), European Union of 15 (11 percent), Japan (8 percent), and the United States (7 percent). The ownership of copper refineries is rather less concentrated than that of mines, with the ten leading companies having 50 percent of output, rather less than in the mid-1970s.

SEE ALSO Allende, Salvador; Dependency; Mining Industry

BIBLIOGRAPHY

Crowson, Phillip. 2003. Mine Size and the Structure of Costs. Resources Policy 29 (1-2): 15–36.

International Copper Study Group. Copper Bulletin. Lisbon, Portugal: ICSG. (Monthly.)

Prain, Ronald, Sir. 1975. Copper: The Anatomy of an Industry. London: Mining Journal Books.

Radetzki, Marian. 1985. State Mineral Enterprises: An Investigation into Their Impact on International Mineral Markets. Washington, DC: Resources for the Future.

U.S. Geological Survey. Copper: Statistical Compendium. Washington, DC: U.S. Geological Survey. http://minerals.usgs.gov/minerals/pubs/commodity/copper/stat.

U.S. Geological Survey. Minerals Yearbook. Washington, DC: U.S. Geological Survey. http://minerals.usgs.gov/minerals/pubs/commodity/copper. (Annual; see chapters on copper.)

World Bureau of Metal Statistics. World Metal Statistics. Ware, U.K.: WBMS. (Monthly.)

Phillip Crowson