Melbourne (Platts)--26Nov2012/444 am EST/944 GMT

The urban regeneration of China will be the "new" driver of global copper demand, OZ Minerals managing director Terry Burgess said in Adelaide Thursday evening at the 38th annual Essington Lewis Memorial Lecture -? one of the most prestigious lectures on the South Australian resources industry calendar.

"While urbanization is still occurring in China at a rapid rate, urban regeneration -- where people are moving from the older style urban dwellings in the 'old city' areas to more modern high-rise living spaces in the 'new towns' -- is now a bigger driver of copper demand," Burgess said.

He expects this demand to continue for some time, which will be beneficial for Australia and in particular for South Australia's Gawler Craton -- considered to be one of the most highly prospective regions for copper in the world.

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Demand for copper will come in the next wave of development in China with copper used for electrical infrastructure, wiring and other elements of construction.

But Burgess said the main use will come from people buying air conditioners, white goods and other appliances.

"Appliance orders have been improving in recent months," Burgess said, with Chinese air conditioning production this October, increasing by 30% compared to the same period last year.

On the copper supply side, Burgess sees the industry struggling to keep up with demand due to various reasons including delayed capacity coming online, weather disruptions and industrial unrest.

Some mature mines, such as Grasberg, Ernest Henry and Chuquicamata, will continue to report production reductions due to declining grades. Four out of the top six producers in the world reported declines in production of around 8-18% in the first half 2012, he said. As such, the global copper industry is expected to have a supply shortfall of around 800,000 mt in 2012, he added.

The only new supply expected to be commissioned in the short term is coming from riskier operating regions, like Oyu Tolgoi in Mongolia and Las Bambas in Peru.

The outlook for copper markets though remains positive, but cost pressures will still be a challenge for Australian production in the near term, Burgess said.

OZ Minerals owns and operates the Prominent Hill copper-gold mine located 180 km from Coober Pedy. The mine produces 100,000 mt/year of copper concentrate, which is sold primarily into the Chinese and Indian markets. The South Australian miner is also developing the Carrapateena copper-gold project near Port Augusta in South Australia.

--Marnie Hobson, marnie_hobson@platts.com --Edited by Haripriya Banerjee, haripriya_banerjee@platts.com

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