Copper closed last Friday on the LME at US$4,774/t. Having started 2016 at US$4,644/t, this makes copper one of the weakest-performing metals so far this year. However, the demand-side outlook seems promising. China already buys some 45% of global copper production. As its giant economy moves from early-stage economic development, dominated by infrastructure building and fixed-asset investment, to the next stage of development, driven by domestic consumption, there will be a huge increase in the demand for copper. Even today, before the transformation is complete, a majority of analysts and economists say that in the next couple of years, there will be a new balance in the market and copper will come back in a big way. Rio Tinto’s decision to go ahead with its multi-billion-dollar Mongolian copper project, Oyu Tolgoi, despite today’s low prices, is a sign that the outlook for copper is promising. While building construction accounts for less than a third of global demand for copper (30.7%), the bulk of demand comes from electrical and electronic products (38.7%), transportation equipment (11.4%), consumer and general products (9.8% and industrial machinery and equipment (9.4%) – mostly market segments that will grow rapidly in a consumption-driven economy. Furthermore, annual copper consumption per capita is at 5.4kg in China and just 0.4kg in India, vs. 10kg in the United States, 11kg in Japan and 14kg in Korea. As China and India become closer to these countries in prosperity, demand for copper will approach their levels too. But above and beyond talk about the demand side, readers may find it useful to examine the supply-side structure of the copper market. (1) One Region: Unlike other metals or minerals, copper is not evenly distributed on the earth’s crust. The world’s single largest porphyry copper belt is the South American part of the Eastern Pacific Belt along the so-called “Ring of Fire” around the Pacific Ocean basin. Within this region, Chile is by far the largest, with almost 30% of the world’s copper reserves and production. (2) Two Countries (Chile and Peru): Two contiguous countries on the west coast of South America, Chile and Peru, have about 40% of world reserves and of today’s annual production. Of the world’s top ten copper mines, Chile has six and Peru one, dominating 70% of production within the top ten. (3) Three Segments on the Cost Curve: The supply side can be segmented into three parts on a cost curve. Poly-metallic mines play a key role, supplying some 20% of production at the lowest cost (because of the contribution from other minerals and metals from the same deposits). The bulk of the supply (about 55%) comes from large and low-cost porphyry mines, usually owned and operated by the majors. This is the core of the supply chain. The third segment (constituting 25% of global production) is made up of high-cost operations. (4) The Million-Tonne Club: The Big Four Producers Even though copper reserves and production are concentrated in Chile and Peru, the mines are actually owned by multinational majors. Four majors are each currently producing more than a million tonnes a year. Rio Tinto (ranked number 6 today) is not in the “Club” yet. But with Oyu Tolgoi in operation, it should be in due time. (5) Five Top Producers Constitute More Than a Third of World Production The top five miners provide more than a third of global production. The top four produce over a million tonnes each, as listed above. The fifth, Southern Copper, is growing toward a million tonnes a year. While the top ten produce about half of global volumes, it is interesting to see the top five are as big as the either next 15 producers or the rest of the world, making an amazingly symmetrical pie chart below.