Antofagasta foresees copper surplus from 2013 to 2015

8th Oct 2013 13:28

The Chief Executive Officer of Chilean mining giant Antofagasta has forecast the market will produce a surplus of copper until 2016. Diego Hernandez said he saw an increase in copper production coming on stream that would push the market into a small surplus in the fourth quarter of 2013 that would continue into 2014 and 2015, he told Dow Jones Newswires.He said demand for the red metal would endure and grow as China's economic development continues to require copper.Hernandez said the surplus would be absorbed in 2016, as he foresaw projects scheduled to be coming on-line in that year likely being delayed.Looking at copper pricing he said: "I see this year very similar to last year."This tallies with a metals and mining equity note from Credit Suisse on Monday, which saw increasing supply and a modest slowdown in industrial production growth resulting in prices coming under pressure once again in early 2014.Analysts there said that prices for those commodities where supply is improving, such as iron ore and copper, would be likely to fall further - although at a slower pace than had been thought previously. The note forecasted a price of $7,407 per tonne of copper for the rest of 2013, dropping to $6,625 in 2014 and bouncing slightly to $6,750 in 2015.Last week's note from the broker stated a preference for copper over iron ore over the medium term."Over the medium term we see ANTO in a favourable position as it remains one of the few global high quality copper companies in a market where we continue to favour copper. Its increased emphasis on brownfield expansions over greenfield is also a positive supported by a strong balance sheet. "However, as volume growth looked likely to be limited until 2017 and with limited free cash flow, the broker estimated a special dividend above the typical 35% payout ratio looked "unlikely". On valuation, the company appeared expensive trading at a premium to historic ranges which analysts believed was unwarranted given "limited growth in the coming years" and potential risks around a possible increase in Chilean corporate tax rates.Shares in Antofagasta were up 1% to 828.5p at 13:53 on Tuesday. OH