Copper producers around the world are preferring to tough out the current period of low prices rather than cut back production, executives and analysts told the CRU World Copper Conference in Santiago Tuesday.
"Copper prices have been falling four years, but it is only in the last year [it has] become painful for producers," said Vanessa Davidson of commodity analysts CRU.
CRU expects prices to bottom out later this year slightly below the average of the first quarter. But given the global surplus, the industry does not expect an immediate recovery.
"We are managing the company on the expectations that current prices will last another two years," Diego Hernandez, CEO of Chilean producer Antofagasta, told reporters at the event.
Any cutbacks, such as Freeport McMoRan's output reduction at El Abra in Chile, have been offset by new mines and expansions entering production, Davidson said.
Hernandez said Antofagasta's new Antucoya mine is on target to reach full capacity by the middle of this year.
Meanwhile, mines that had been expected to close have managed to stay open with tough cost cutting and adjustments to mine plans, sometimes with new management in charge.
Private equity firms Audley Capital and Orion Mine Finance acquired the Mantos Blancos and Mantoverde copper mines in northern Chile from Anglo American in 2015 for $300 million. With high costs and limited reserves, many expected them to close.
But new operator Mantos Copper has brought their costs below $2/lb and drilled sufficient reserves to continue production for at least another decade, said executive chairman John MacKenzie.
Industry leader Codelco has also preferred to cut costs rather than production, said CEO Nelson Pizarro. With its cashflow being squeezed, the state-owned miner will cut its planned investment through 2019 by $4 billion, but the near term impact on production will be minimal.
"70,000 mt over five years is next to nothing," he said.
Instead, the emphasis is on reducing costs that will have fallen almost a quarter fron their 2012 peak.
CRU estimates that the 10% most expensive mines have cut production costs by an average of 30% in recent years.
