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australia sees copper output at decade low

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    By: Reuters
    15th December 2009
    Updated 2 hours 12 minutes ago
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    Australia slashed its forecasts for copper production and exports for fiscal 2010, blaming disruptions at BHP Billiton's giant Olympic Dam mine for what would be the nation's lowest output in a decade.

    Production from the mine - the world's fourth largest copper deposit - may drop by up to 70 000 t before repairs to the main shaft are completed and full production resumes, the Australian Bureau of Agricultural and Resource Economics (ABARE) said.

    Its estimate of losses from the mine is up to 40 percent higher that most analysts' forecasts, and represents more than a third of total capacity of around 200 000 t/y.

    Copper prices are already rising - up by around $1 000/t to $6 900/t since the start of October, and more than doubling so far this year - on concerns that global demand could outpace supply next year.

    In its latest quarterly outlook, ABARE cut its forecast for refined copper exports by 15,8 percent for the year to June 30, 2010, and its estimate for refined copper output by 13 percent to 408 000 t.

    "If realised, this will be the lowest refined copper production recorded in Australia since 1998-99," it said.

    Australia's Macquarie Bank predicts a global copper supply deficit is looming this year that will take two years to correct, increasing its 2010/2011 copper price forecasts by two to three percent on Tuesday to $3,25/lb to $3,40/lb ($7 166/t to $7 500/t).

    The bureau also revised up iron ore exports by two percent and coking coal exports by 16,2 percent, citing strong demand for raw materials by Asian steelmakers.

    Chinese imports of coking and thermal coal and iron ore should remain strong into 2010, underpinning higher production from Australia mines as demand shows signs of picking up in other Australian export markets, according to the bureau.

    The iron ore export trade is a high stakes business worth more than $80-billion a year.

    It is dominated by Australians Rio Tinto and BHP, along with Brazil's Vale, on the mining side, and China, the world's biggest iron ore consumer, on the other.

    "China will continue to have a significant influence over the demand for minerals and energy commodities in 2010, but consumption is also forecast to increase gradually in OECD economies," the bureau said.

    Organisation for Economic Co-operation and Development (OECD)-based consumers that drew on their own inventories as the global economic slowdown worsened, reinforcing the sharp weakening of underlying demand for industrial commodities, may soon be returning to the market to replenish stockpiles, according to the bureau.

    "The rebuilding of stocks in 2010, if it occurs, will provide additional support for minerals and energy commodity demand," it said.

    In October, haulage equipment failed inside the main shaft of Olympic Dam, which transports 75 percent of the mine's copper and uranium-bearing ore to the surface. It is under repair and is not expected to be fully operational until the first quarter of 2010, according to BHP Billiton.
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