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Can Copper Provide Upside to BHP Billiton in Fiscal 2018?

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Jan. 25 2018, Updated 10:34 a.m. ET

Copper production

Copper prices (DBB) have been quite buoyant lately, rising more than 30% in 2017—the second consecutive annual gain.

BHP Billiton’s (BHP) copper production for 1H18 increased 17% to 833,000 tons. The following factors contributed to the significant increase.

  • A 29% increase in copper production at BHP’s Escondida: The Los Colorados Extension (or LCE) project started successfully in September 2017, which helped volumes at Escondida.
  • Production at BHP’s Pampa Norte also increased 9% in 1H18 year-over-year (or YoY) to 126,000 tons. The record mined material at Cerro Colorado and a fast ramp-up at the Spence tank house supported this 9% increase.
  • Copper production at Olympic Dam, on the other hand, declined 31% to 54,000 tons YoY. The decline was mainly due to a planned smelter maintenance campaign completed recently.
  • Copper production at Antamina increased 5% to 70,000 tons in 1H18 YoY.
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Copper guidance

BHP (BHP) maintained its fiscal 2018 copper production guidance between 1,655,000 and 1,790,000 tons. The production guidance for respective operations at Escondida, Pampa Norte, Olympic Dam, and Antamina Copper also remains unchanged.

On average, market participants are expecting strong copper demand in 2018. On the supply side, analysts expect some shortfall in copper production. Several mines—such as Escondida, owned by BHP (BHP)—have labor contracts coming up for negotiations this year. Last year, we saw labor-related incidents at several mines, including those operated by Freeport-McMoRan (FCX), Southern Copper (SCCO), and Teck Resources (TECK). Supply-side disruptions could have a bearing on copper prices in 2018, much like we saw last year.

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