Copper demand from China to surge, BHP predicts

BHP Billiton has predicted China will account for around 7% of global demand for copper, after analysing the country’s international infrastructure spending plans.

The multibillion dollar programme, called the Belt and Road Initiative and launched in 2013, is intended to connect China with the rest of the world through a “belt” of overland corridors and a “road” of shipping lanes. It entails a vast number of overseas construction projects in 115 countries – up from BHP's earlier estimate of 68 – across South America, South East Asia and parts of Africa.

In its latest analysis, BHP estimates that the initiative will represent one third of the global economy and drive spending of up to $1.3trn on infrastructure projects by 2023.

It will also, according to the blue-chip miner, create a surge in demand for copper. BHP’s analysis expects demand to increase by around 1.6m tonners, around 7% of annual demand, over the next five years.

More than 70% of that demand is expected to come from around 100 new power projects.

Said BHP: “Copper does not directly benefit as much as steel from the road, rail and other transport and logistics projects that represent around half of the total project outlay. However, the positive spillover effects of this infrastructure is expected to provide a wider field of economy opportunity in recipient countries for decades.”

It conceded that foreign investment was a "complex and risky business". But it added: "There are signs that China is developing its institutional statecraft to improve its management of such challenges in the future, and the capacity of its firms to develop infrastructure at scale are beyond doubt."

BHP, which owns the world’s largest copper mine, in Chile, derives around 28% of its earnings from the metal. One of its core sectors, it is looking to expand mines in Chile and Australis as it seeks to counter the impact of failing quality at its operations.

BRAZIL UPDATE

Separately, BHP updated the London market on the Samarco compensation programme. Samarco, a joint venture between BHP and Vale in Brazil, was involved in a deadly dam collapse in 2015, which killed 19 people and was an environmental disaster. Samarco, which has always claimed it followed Brazilian laws, has been in negotiations with local prosecutors ever since.

Press reports said that a final compensation deal had been reached and payments would now be made to families of the 19 dead as well as those who had lost homes and other properties in the disaster.

BHP said it had noted the media reports, and added: "The agreement outlines the processes and principles for the negotiation and implementation by the Renova Foundation for the formal compensation programme for impacted people Mariana, Minas Gerais. To date, the Renova Foundation has been providing compensation and support to many of the individuals in Mariana who have been impacted by the dam failure."

The Renova Foundation was set up by the companies involved to manage the compensation scheme following the dam collapse.