Copper prices to remain high for 2-5 years

Leony Aurora, The Jakarta Post/West Sumbawa

With the pace of global demand, especially from China, currently outstripping that of supply, copper prices are estimated to remain high for the next two to five years, a major player claims.

PT Newmont Nusa Tenggara's (NNT) finance director Dan Desjardins said that copper prices were showing an extraordinary spike right now, riding at an all time high of around $1.50 a pound.

"In the last 10 years or even 20 (years), the price of copper has averaged some 92 U.S. cents a pound," he said at the firm's compound in Batu Hijau in Sumbawa island, West Nusa Tenggara.

The average price of copper produced by NNT for the international market last year was $1.33 a pound, more than 50 percent higher than the average price the year before of 86 U.S. cents per pound.

"I believe copper has excellent fundamentals over the next two to five years and should do very well," Dan said.

The main reason for the price rise is a trade imbalance, with demand from China, the world's largest consumer of the metal, climbing rapidly over the last four years, while there has been no significant increase in supply.

"There aren't any new big (copper) mines coming up," said Dan. "For the next six months, it (copper prices) literally could stay at $1.50 (a pound)."

Last year, NTT's copper output of 718 million pounds accounted for about 3 percent of world demand.

In the long run however, as copper prices keep rising, consumers may try to replace the metal with other materials, like aluminum or plastics, which would eventually put downward pressure on the price of the metal.

"I can't really see it going much higher," Dan said.

Copper is used in electrical wiring in vehicles, as well as in homes and for power cables.

China has aggressively expanded its market worldwide, flooding Asian countries with cheap motorcycles and electronic products.

Indonesia has two major copper producers, namely NNT with its Batu Hijau open-pit mine, and PT Freeport -- the larger of the two -- which operates a huge gold and copper mine in Papua.