Copper Can Withstand U.S.-China Trade War As Supply Concerns Grow - Mining CEO
(Kitco News)- Despite the threat of a growingtrade war, one copper-mining chief executive officer said that he is optimisticthat shrinking supply will help the base metal weather the current storm.
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| Paul West-Sells, president and CEO of Western Copper and Gold |
Industrial metals are being hardhit as the U.S. government escalates its trade war with China. Copper, inparticular, is feeling the heat with prices down more than 3% on the day. However,according to Paul West-Sells, president and CEO of Yukon-based Western Copperand Gold, the sell-off is just short-term noise.
“We have to look at why copperwent from $2 to $2.50 to $3 a pound so quickly,” said he said in a recentinterview with Kitco News. “Certainly you have seen a pickup in demand becauseof positive global growth, but that didn’t drive copper prices higher. Whatdrove copper prices up 50% was the supply story.”
Copper, one of thebest-performing assets in 2018 as prices traded near multi-year highs lastmonth, has fallen sharply after the U.S. government threatened another $200billion in tariffs on a wide range of products imported from China. Analystshave noted that the escalating trade war threatens global economic growth,which impacts copper demand.
Comex high-grade copper futureshave fallen through critical support at $2.90 a pound. September copper futureslast traded at $2.745, down 3.31% on the day.
West-Sells said that he doesn’t expectthe current market dynamics to change anytime soon as it has been nearly six yearssince the last copper mine was built.
Looking past short-termgeopolitical instability, West-Sells said that the copper market will be incritical need for supply five years from now.
“We are at this point wheredemand has caught up with supply, but in the next five to 10 years we are goingto need 5 million tonnes of additional supply,” he said. “The world desperatelywill need a new supply.”
West-Sells added that commodityinvestors need to continue to focus on the bigger picture. While copper pricesare down 17% from their recent highs, the market is still up 35% from its 2016multi-year lows.
Western Copper is moving forwardwith the development of its Yukon-based Casino project as it continues thepermitting process. In a recent company presentation, West-Sells said that thecompany is about three years away from starting construction and nearly sevenyears from production.
He added that this year thecompany’s goal is to find a partner or a buyer to take the project through toproduction.
“We think because of the growingsupply deficit this is the perfect time for someone to join us or buy theproperty,” he said. “I am starting to see interest in copper companies not seensince 2010.”
The only significant threat tothe copper market would be a 2008-style recession, and West-Sells said hedoesn’t see that scenario on the horizon.
“I’m not losing sleep over thecopper market just yet,” he said.
Western Copper is considered a world-classcopper deposit with a proven reserve of 4.5 billion pounds of copper and 5.4billion in inferred resources. In precious metals, the property holds almost8.9 million ounces of gold in proven reserves with another 9 million ounces ofinferred resource.
By Neils ChristensenFor Kitco News
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