Copper hit a depression in 2016—but strangely, it appears to be a strong metal for the long haul. And, one could say, copper mining trends are worth their weight in gold: the red metal’s sales output has long been seen as a thermometer for the projection of the world economy.



Ahead, Goldman Sachs predicts that the price of copper will drop due to a surge in supply in 2017. The company keeps a fine-tuned eye on the top 20 copper mining companies, which produce close to 60 percent of copper worldwide. What’d they see? The mines actually increased output by 5 percent in the first half of 2016. Up ahead, the estimated pick-up in production is 15 percent.



“Company guidance and our estimates suggest that copper is entering the eye of the supply storm,” reported Frik Els for Mining.com.



The World Bank (WB) also sees a copper trend on the skyline for 2017. The WB July 2016 Commodities Outlook reports that copper prices would and are dipping by 18.5 percent, due to production surplus and a demand decrease in China. Conversely, the prices are expected to swing back up.



“The Bank expects that copper prices will fall from USD $5,510 [per ton] in 2015 to USD $4,650 in 2016, due to expected production surplus and a decrease in Chinese demand. However prices will rise to USD $5,577 in 2020, and USD $7,000 in 2025,” reported Zambia-Invest.com.



One of the top copper consumers is the automotive industry. China leads as the largest automotive market, followed by the U.S. and Europe, and China’s passenger car sales leaped 26.6% year-over-year in August, reported Market Realist. And that growth wasn’t isolated: it was the fourth consecutive month that the country’s car sales grew by double digits. It’s difficult to pinpoint if those auto sales will decline, grow, or remain stagnant.  



However, at the end of the day, copper is still a primary metal for the largest developing countries in the world, including China and India.



A Snapshot of the Copper Trend: Why the lull?



The dip in copper sales was surprising in 2015. Mostly, because the red metal continues to reflect a strong long-term projection of sales growth.



Nine large Chinese copper producers reduced production by close to 5 percent: more than 200K tons. Shanghai prices saw a greater-than-six-year low, reported journalist Rick LeBlanc for The Balance, in August. And Chile’s prediction of copper production dropped from 6 to 5.94 million tons.



Most likely, the low-end swing was due to a handful of short-term factors—delayed projects, water and power shortages, cuts in exploration budgets, and a hike in stripping ratios, to name a few examples.



As a result, the production of copper worldwide increased by only 0.8% in 2014, according to global consulting firm Deloitte in Tracking the trends 2016: The Top 10 issues mining companies will face in the coming year.



Chile’s copper mining market—among one of the largest in the world, as it’s home to nearly one-third of the world’s copper—likewise took the brunt of seemingly temporary factors, which varied from work stalls caused by heavy rain to ongoing drought.



China played a large role in the decline of copper sales, as well: infrastructure, automobile and construction spending all dipped—partly due to the country’s development of the smart electricity grid infrastructure, which totes financing issues and political tug-of-war. China also has unreported copper inventories, which could equal hundreds of thousands of tons.



Copper recycling is another variable to consider. From 2004 to 2013, the global recycling rate for copper scrap wavered between 33 and 36 percent, with the peak output in 2007. As of 2013, the quantity was back to 33 percent, which it hadn’t dipped to since 2005, according to Statista.



All of the above factors play into the global marketplace; each one has the potential to change the outcome. With the uncertain market, we here at General Kinematics are grateful we get to provide dependability and superior service for our customers. If you’d like to learn more about the equipment we offer, visit our equipment page or contact us.

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