Rio Tinto chief executive officer Sam Walsh said the company is just weeks away from getting groverment approval to ship copper from its Oyu Tolgoi Mine in Mongolia. With the approval, the company expected to hit its target date for commencing production at the mine.
The Mongolian government and Rio Tinto have clashed over management fees, cost overruns and transparency of the operation in recent months, but according to a report by the Financial Times the company is confident that it will meet its deadline.
New supplies from Oyu Tolgoi, along with Chilean mines Los Bronces and Escondida later this year, are expected to accelerate the global copper surplus.
“The pace of the inventory increase will pick up in the fourth quarter when new mine projects come on line, and demand is seasonally weaker,” said Ryan Belshaw, copper analyst at Macquarie in London.
Sluggish global demand for the red metal amid rising supplies has been a concern for analysts and traders. Demand from the US, Europe and Japan has been extremely weak for the large part of this year, said analysts. The Chinese, the largest consumers of copper, have also been refraining from buying so far this year.
The latest monthly trade data showed that in April, China’s imports of refined copper and copper products had fallen 7.4 percent from a month before and 21 percent from a year earlier. For the first four months of the year, copper imports fell 27.2 percent.
Walter de Wet, analyst at Standard Bank in Johannesburg said the fall in copper import levels came as consumers of the red metal used up their inventories rather than buying from overseas. “The data is consistent with the PMI data earlier this month, suggesting that raw material inventory levels declined during the month as fabricators destocked,” he said.
While some traders and analysts see China’s stricter controls over financing deals using copper as collateral affecting import levels of the metal, others expect Chinese buyers to return to the market now that prices on the London Metal Exchange have fallen below those in Shanghai. “Now prices on the LME have fallen, we are seeing signs that Chinese buyers have come back to the market,” said Belshaw.