Copper, the third most widely used metal in the world after steel and aluminum, is deeply affected by the global economy, to the extent where an increase in its price reflects growth in the major world economies.
China is the biggest copper consumer in the world, using 40 percent of the global production; making it a key player in setting the global prices for the red metal. Recent slowdowns in the Euro Zone, China, and Japan’s economies as well as a constant rise in the value of dollar have caused a drop in the copper prices.
The US Federal Reserve reduced its purchase of government bonds and the move led to an increase in the dollar’s value. The rise in dollar value was followed by lower demand for base metals including copper. The decline in copper demand was accompanied by a partial recession in China’s construction sector – the biggest consumer of copper among East Asian countries. The above factors were propellants that negatively affected the global copper market.
The Business Monitor International’s commodities team recently reaffirmed its below-consensus forecast for average copper prices through 2018, on the back of slowing China’s end-user demand and only modest demands in the developed world.
Iran, as the 14th biggest producer of smelted copper and the 23rd producer of the refined copper, has also been affected by the global trends as the copper witnessed the sharpest decline in the global markets and sank to its lowest prices in 2010.
Copper prices also came under pressure earlier this month after Chinese authorities approved an export tax rebate of 9% for copper bars, rods and profiles, while increasing the rebate for foils to 17% from 13% to stimulate exports.
While a global increase in the red metal’s production is expected, the current meager investments and high demand anticipated in the next five years will most likely deplete the world’s copper reserves by 2020. Other key factors affecting the copper production are declining grades (with fewer high-grade discoveries), and the slow rate at which new mines are discovered to meet the demand. Extraction of low-grade copper has continuously dropped since 2000 due to the high production costs. Hence, an important issue for the producers is to lower the production costs.
The biggest challenge for the National Iranian Copper Industries Company (NICICO) – the main enterprise responsible for exploring, extracting, and processing copper in Iran – is to implement development plans inherited from the previous government. However, the plans are “unlikely to be implemented in time,” according to Babak Babaei, an exploration and development engineering manager at NICICO.
According to Babaei, the development projects have been prioritized, with the implementation of quick-yielding projects on the priority list.
Major copper mines in the country include Sarcheshmeh, Songoon, and Meidook, all of which are owned and operated by NICICO.
While Iran has 19.5 million tons of proven copper reserves – nearly 5% of the proven copper reserves in the world – it currently produces only 1% of the world’s copper.
Based on official reports, the current capacity for the downstream copper industry including copper wire, copper sections, and copper tubes is 940,000 metric tons. But, the sector’s efficiency is estimated at only 20% due to low consumption of the metal in the country.
NICICO’s development plans, in which all technical and economic considerations as well as payback periods have been studied, are considered good opportunities for foreign and Iranian investors.
Market analysts predict more supply than demand for the red metal in 2015, in light of the reduced demand in China as well as an unprecedented price fall in the copper market. This means global prices will either decrease further or, in an optimistic scenario, remain at the current levels.
