Brazilian copper demand seen rising

Demand for copper and finished copper products in Brazil could grow at a faster pace in the next few years as the country's economic boom spurs more building and new car sales, a senior industry official said on Monday. "In the last few years we have been rising at an average of 5 to 6 percent," Sergio Aredes, president of the Sindicel association of 60 copper product manufacturers, told Reuters in an interview.
"We think from 2009 onward to 2011 we will probably see a bit more than that at 7 to 8 percent growth," he said. Economic growth, fuelled by high prices for the many food and mineral commodities Brazil produces, is driving higher consumption.
New apartment blocks and retail outlets have mushroomed around the business capital Sao Paulo, and off-shore oil reserves of between 5 billion and 8 billion barrels were discovered a year ago, boosting the longer term outlook. The government is promising more investment, particularly through its Accelerated Growth Program (PAC), which Aredes said would bring business to his industry if spending on infrastructure rose.
"There's still not too much investment in that. The government is making a lot of noise about the PAC but it is more on paper than in fact, but it will come in the next two or three years. That brings good potential for our industry," Aredes said. He said the construction of new mills to crush sugar cane to produce ethanol biofuel was also bolstering demand for copper with more demand coming from expansion in mining and utilities.
Copper prices have risen sharply in the last few years, and the higher costs were being passed on to product manufacturers within Sindicel, forcing them to cut margins to absorb some of impact on consumers, Aredes said. He said he expected prices to continue to rise given the tight supply and demand. "For 2008, we were working with a projection of $7,500 a tonne. We increased this to something around $8,200 to $8,500.
I don't think it is going to reach that level but it won't be below $8,000," Aredes said. He said the industry invested heavily in the past two years in anticipation of continued strong growth. "Demand is increasing so you have to raise your capacity," Aredes said. Brazil is a net copper importer, producing around 220,000 tonnes and importing up to 130,000 tonnes more, Aredes estimated, most of which he said came from world top copper producer Chile.