Freeport CEO ‘Very Confident’ on China Copper as Rates Rise

Business ExchangeBuzz up!DiggPrint Email .Freeport-McMoRan Copper & Gold Inc. (FCX), the world’s largest publicly traded copper producer, said it’s confident Chinese copper demand will continue to gain even as the nation raises interest rates to cool inflation.

“China has done a remarkably good job of managing the extraordinary growth that they have,” Freeport Chief Executive Officer Richard Adkerson said today in an interview in Santiago. “In the long run we are very confident about the outlook for copper demand in China.”

The People’s Bank of China yesterday boosted its benchmark one-year lending rate by a quarter point to 6.31 percent. Premier Wen Jiabao’s government acted ahead of a report forecast to show consumer prices climbed 5.2 percent last month from a year before, the fastest pace since 2008.

China will account for half of the world’s copper demand by 2020, John MacKenzie, head of Anglo American Plc’s copper business, said in a presentation in Santiago today. There will be a “huge” increase in infrastructure spending in emerging countries, he said. The Asian nation is the world’s largest copper consumer and metal demand is surging as the nation seeks to build more homes, autos and appliances and upgrade power-grid networks as swathes of rural population move to its cities.

‘Not Left Behind’

“The government is focusing enormously on making sure that the vast rural population and those that are not among the new wealthy middle class are not left behind,” Michael Lion, the head of the Asian unit of New York-based Sims Metal Management Ltd., the world’s largest metals recycler, said today at a conference in Santiago. “The greatest focus for achieving that will undoubtedly be provisions such as electricity. That, ironically, may provide a fairly consistent demand for copper.”

The Chinese premier last month described inflation as “a tiger” that once set free will be difficult to cage, and also as a potential threat to social stability. Consumer prices jumped 4.9 percent in February from a year earlier, topping the government’s full-year target of 4 percent.

China’s industries are still growing 10 percent a year, while U.S. and European copper demand is also recovering, according to Adkerson.

“The business community in the U.S. is more optimistic than it was a year ago,” he said, adding that “It’s not a marked, or steep recovery.”

‘Still Lagging’

U.S. copper demand for construction in commercial or residential real estate are “segments that are still lagging,” he said.

Freeport rose 76 cents, or 1.4 percent, to $56.53 as of 2:48 p.m. in New York. The stock fell about 4.6 percent this year, compared with a 6.1 percent gain for the Standard & Poor’s 500 Index of which it’s a member.

Codelco, the world’s largest copper producer, predicted prices will average $4 a pound this year as China continues to demand more of the metal and on restrictions in mine supply, Chief Executive Officer Diego Hernandez said in an interview.

Increasing rates may signal the government’s confidence in the strength of an economy forecast by the World Bank to expand 9 percent this year. A purchasing managers’ index released April 1 indicated that the world’s second-biggest economy is “growing smoothly, with a very moderate slowdown,” Bank of America-Merrill Lynch economist Lu Ting said that day.

Chinese demand may recover to grow 6 percent this year, Charlie Sartain, who runs Zug, Switzerland-based Xstrata Plc’s copper business, said in an interview in Santiago yesterday. Demand is also recovering in Europe and the U.S., he said.