Copper mining is a dying industry, having passed the point of maturity it is now in decline.
While there is extremely moderate growth predicted in the next five years, the world price of copper is forecast to steadily decline.
The future is not bright for this crucial metal, even as demand slowly increases.
According to a BHP Billiton presentation and recent United Nations data, demand for the metal will increase as many third and second world nations develop, creating long term drivers with increased consumption as they build their infrastructure.
This in part is due to the massive shift society is seeing, precipitating a decline in rural populations to greater urbanisation and in turn economic development.
With the global population currently standing at more than 7.1 billion it is almost evenly split 50/50, however "the urban population is expected to grow globally from 3.6 billion (as of 2010) to 4.3 billion (in 2020) and to 5 billion in 2030," the UN data stated, eventually accounting for 60 per cent of the world's total population.
Unicef reports that by 2050 around 70 per cent of the world will live in cities.
Australia will also be one of the most urban nations in the world, with 94 per cent of people living in cities or metropolitan areas.
China and India alone will have cities with more than a billion people living in them.
In the meantime the rural population is predicted to remain flat at around 3.5 billion for the next three decades.
As part of this massive shift towards urban centres commodity demand is forecast to grow in line.
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These people will need to build, power, and run their cities, and copper will be the metal that will allow them to do so.
According to BHP "Chinese copper intensity doubles from rural (less than 500 000 people) to smallest urban centres; and more than triples from rural to large urban centres".
It is proven that demand evolves with economic development, although "copper [does] plateau later in the industrialisation cycle" both "China and India are still in the early stages of development".
In explicit terms, the total demand for semi-fabricated products is expected to grow at three per cent compound annual growth rate (CAGR) over the coming decade, with the primary drivers China and India sitting at five and ten per cent CAGR respectively.
While average industry copper grade percentages remained fair-ly consist in process feed from 1980 to 1998, they have been on a sharp downward slope that looks to get only worse.
High grades, high quantity mines such as Escondida, Grasberg, Bingham, Olympic Dam, Prominent Hill, Northpakes, Cadia or Ernest Henry are unlikely to be on the cards again.
"Due to these declining grades the average run of mine (ROM) grades for copper have actually fallen by three quarters to less than one per cent, yet at the same time annual supply increased from under one million tonnes to more than 16 million tonnes," BHP CEO Andrew Mackenzie said.
According to a Wood Mackenzie report from 2012 "copper grades have declined at an average rate of 2.8 per cent per annum over the last decade".
It went on to state that at current production rates the quality will continue to decline due to the depletion of existing resources and these lower grade ores.
As Wood Mackenzie points out: "New discoveries have not been able to reverse the long term trend [of decline]".
This, coupled with BHP's Andrew Mackenzie's comments on grades, projects a bleak future.
And while there is likely to be a short term spike as long awaited projects come online, in the longer term the forecast resource depletion means that a new, and currently unknown supply is needed.
The only likely saviour, in terms of Australian producers, is a weak Australian dollar, which will push up revenues despite prices remaining fairly flat.
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According to IBISWorld re-search "industry revenue is fore-cast to grow at an annualised rate of 1.5 per cent over the next five years to US$7.1 billion in 2019/20".
"This reflects the combination of higher output levels, a weaker Australian dollar and higher US dollar prices.
"If the Australian dollar de-preciates against the US dollar, export demand increases and contracts will earn domestic players more revenue."
Speaking to BNP Paribas managing director energy and natural resources - investment banking Asia Pacific, David McCombe, he explained in the short term "copper will be coming off over 2015 through to 2017, but it will be moving up again to the back end of 2017."
Much of this is due to the "current imbalance because of higher supply, as there is around 23 million tonnes of supply but only about 22 million tonnes of demand".
"This will not be a massive move down, but this oversupply will hurt for some time."
ANZ head of economics corporate and commercial, Justin Fabo, added that "copper looks vulnerable enough to slip back through the US$7000 per tonne mark as we approach the normally quiet northern hemisphere summer".
"Operating rates at copper tube and pipe fabricators fell below 80 per cent mid-year, an indication that end-user demand is weak; we would be positioned for some further downside in the short-term."
However IBISWorld added "increased output [will] more than offset lower Australian dollar copper prices".
Looking beyond this period Wood Mackenzie estimates a price of US$300 per pound by 2020 and beyond while analysts polled by Consensus Forecast expect an average of US$291.8 per pound for 2018 through to 2022.
In terms of revenue for the industry growth rates are set to slow progressively over the next few years before entering into a brief period of decline in 2017/18, before returning to minimal growth in the next period.
