Since the second quarter of 2015, major global copper mines have been repeatedly disrupted by various incidents. Will these disruptions affect the growth of global copper production in the second half of the year and, consequently, the balance between supply and demand in the global copper market? Based on the financial reports of major publicly listed copper producers we’ve been tracking, as well as comparisons with data from international research organizations, we believe that there is a certain risk of a slowdown in the growth rate of copper production in 2015; however, the overall upward trend in production is unlikely to be reversed.

　　Copper mine production in the first half of the year showed positive growth. According to our estimates, the copper mine output of the world’s 11 largest copper producers did not decline in the first half of 2015 despite various disruptive factors, with a year-on-year increase of 0.04%.

　　Specifically, among the world’s major copper producers—BHP Billiton, Freeport-McMoRan, Rio Tinto, Anglo American, Southern Copper, Antofagasta, and First Quantum Minerals—that have already released their second-quarter financial reports, total copper production in the second quarter of 2015 reached 2.2965 million tons, an increase of 2.7% compared to the same period in 2014. For the first two quarters of 2015 combined, total copper production remained roughly flat.

　　Codelco, Chile’s state-owned copper company, saw its copper production increase by as much as 3.8% year-on-year, while Glencore-Xstrata’s copper production declined by 3% compared to the same period last year, primarily due to differences in ore grades and planned maintenance shutdowns. However, most of this decline was offset by increased copper production in Africa. Glencore expects its full-year copper output to range between 1.5 million and 1.55 million tons.

　　In July, factors disrupting copper mine production increased. First, due to a shortage of electricity supply, Zambia’s national power company expanded power cuts in the Copperbelt Province, making it difficult for Zambian copper miners to maintain stable operations. In July, mining companies operating in Zambia’s Copperbelt agreed to reduce their electricity consumption by 10% to 15% in order to ease the strain on the country’s power grid, potentially affecting output by around 20,000 to 30,000 tons.

　　However, since Zambia lowered the tax rate for underground mining from the current 9% to 6% in 2015—effective July 1 of this year—and maintained the tax rate for open-pit mining at 9%, this move will stimulate a recovery in the country’s copper production. In addition, the First Quantum copper mine project resumed power supply in August, signaling that the impact of power shortages on copper production is gradually easing.

　　Second, a large-scale strike by Codelco’s outsourced workers initially led Codelco to suspend operations at the Salvador copper mine, which has a production capacity of 54,000 tons. However, on August 3, production at the Hales mine—whose output stands at 140,000 tons—also began to be affected. Nevertheless, the impact of the strike is expected to be limited.

　　Production at OK Tedi’s copper mine in Papua New Guinea has come to a standstill due to declining water levels. Last year, the company’s copper mine in Papua New Guinea produced approximately 76,000 tons of copper. Freeport stated that its smaller copper and molybdenum mines in North America may cut production to help reduce costs. Antofagasta’s full-year output fell to 665,000 tons, a decrease of another 30,000 tons. These disruptions mean that total copper production will not exceed 200,000 tons.

　　Copper ore production is expected to continue posting positive growth in the second half of the year. An important indicator for gauging the tightness of copper concentrate supply is the copper concentrate processing fee. In July, the spot processing fee for copper concentrate showed a noticeable rebound compared to June, suggesting that the supply of copper concentrate in July was not particularly tight. According to data from My Color Network, in July 2015, the spot processing fees for copper concentrate (TC/RC) were quoted at US$115–120 per ton and 11.5–12 cents per pound, whereas in June they had fallen to as low as US$90–115 per ton.

　　The commissioning of newly built production capacity will offset the output gap caused by disruptive factors. According to data released by relevant overseas institutions and financial reports disclosed by listed companies, in 2015, there were 12 planned projects slated for commissioning, with a total capacity of approximately 573,000 tons per year; in 2016, there were 12 new projects, with a combined capacity of about 753,000 tons per year.

　　Overall, as we enter the third quarter, copper mine production—which declined in the second quarter—is expected to recover somewhat. Moreover, the newly commissioned capacity of 753,000 tons is fully capable of offsetting reductions of up to approximately 200,000 tons. As a result, copper mine production in the second half of 2015 is unlikely to experience negative growth; rather, it is highly probable that the global growth rate of copper mine production will merely slow down slightly.