As we roll through earnings season a report that caught my attention was Rio Tinto’s (NYSE:RIO) earlier this month, which showed copper production from their principle mine, Escondida, down significantly on the year. Here is the Financial Times, on 14 July:
Rio Tinto revealed a steep decline in output at the world’s largest copper mine, demonstrating the mining industry’s difficulties supplying enough copper to keep up with rising global demand. In the first six months of the year Rio’s share of copper production at Escondida, the Chilean mine that accounted for 7 per cent of global production last year, fell 23 per cent to 118,000 tonnes over the same period in 2010. The drop at Escondida – whose ownership is split between BHP Billiton, Rio, and Mitsubishi – dragged the miner’s total copper output lower by 18 per cent to 273,000 tonnes.
Copper, like oil, has seen stubbornly resilient prices this year in the face of shocks from Japan’s earthquake to the EU’s sovereign debt crisis. Not even the renewed, downward phase in the US housing market has been enough to keep Dr. Copper laid low. For example, readers will recall my co-post from January, written with Paul Kedrosky, on soaring metal prices and metal theft , Scrap Metal Cowboys. In that post I showed that the growth rate of global copper production had slowed significantly over the past decade, from 2.919% in the twenty years leading up to 2000, to 1.814% in the years since. Well, fresh data is now available on 2010 global copper production, which has once again dragged the decade’s growth rate lower. | see: Global Copper Production in Metric Tons 1980 -2010. Click to enlarge:
For the annual growth rate of global copper production to fall to 1.69% is concerning, especially at a time when the world proposes to switch energy demand to the power grid, newly populated by wind and solar. Such a low production growth rate recalls Gold’s annual 1.2%, the slow pace often cited by hard money enthusiasts as a feature of gold’s scarcity. In general, I see very little evidence that the global greentech and renewable energy industry has yet confronted this constraint on future growth. In New York, yesterday, copper closed at $4.47 per pound–not far from its all time high of $4.65 set earlier this year.
Copper Peak, by Jean Laherrere, in The Oil Drum, 2010.