BHP Billiton fired up by Asia`s need for cool air
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Copper outlook firms on air conditioner demand in China
Resources Editor
A SURGE in China`s production of air conditioners is helping to fire up demand for copper, according to the world`s largest resources group, BHP Billiton.
In a briefing on the outlook for base metals, the company said yesterday that Chinese demand remained a central element in the outlook for copper, which helps to explain its investment in new projects that will expand output by 40% over the next three years.
BHP Billiton is the world`s largest producer of copper, and buoyant demand for the metal helped boost earnings in its base metals division by 304% in the year to June.
BHP Billiton`s marketing director John Crofts said that `copper is and remains a modern, relentless growth metal`.
He said that with the expected growth in gross domestic product (GDP) per head in China, demand would continue to be strong for copper for use in air conditioners, refrigerators and cars.
`This is a key part of the Chinese government`s strategy,` said Crofts. `The low cost of Chinese production is opening new markets for copper.`
He said China could produce air conditioners at a lower unit cost than its competitors `which makes affordability higher than in the past and provides sustainable demand for copper`.
`Air conditioners are moving from a luxury item to an everyday item.`
Crofts said that Asia now accounted for about half of the world`s demand for copper and other major metals, with China having become `the best market for refined copper in the world, surpassing the US`.
`China`s ravenous hunger for minerals is due to the size of its population and if it grows its per-capita GDP, demand will grow.`
Crofts predicted a 3,5% global growth in demand for copper over the next few years. This would mean `exciting prospects for our new projects`.
He said China was not the only market to show promise: `India is another encouraging story.`
He said he expected an overall deficit in the copper market next year , even though the market should move into surplus in the second half of the year.
BHP Billiton`s president of base metals, Diego Hernandez, said there was a series of growth projects planned in the company`s Chile copper operations .
One will be the opening up of a new pit at the Escondida mine, with a new treatment plant using leach extraction methods, which will allow the treatment of previously marginal ore.
The board of BHP Billiton will be asked to approve the development of the new $1bn Spence mine, which is expected to produce 200000 tons a year of copper.
BHP Billiton`s copper production this year is expected to be in the order of 1-million tons. Hernandez said this could rise to 1,4-million tons by 2008 with the group`s expansion projects.
He said that one issue that was being closely monitored was the intention of the government in Chile to introduce royalties on copper mining.
BHP Billiton closed down 3,5% at R67,80
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