Copper market to remain in deficit this year – GFMS survey

Copper supply would remain tight during 2012, despite the expectation of slightly higher production levels, consultancy Thomson Reuters GFMS said on Tuesday.

Research director Sanjay Saraf said the supply-side of the balance equation would be relatively tight and potential risks that could prompt similar production disruptions to those seen in previous years were visible.

“Even factoring in increased mine supply, we are still forecasting a deficit for 2012 as a whole, albeit a smaller one than last year’s estimate of 256 000 t,” he said, adding that it was anticipated that the copper market would remain close to balance in 2013.

However, the GFMS ‘Copper Survey 2012′ also found that a number of factors continued to reduce the rate of demand growth, including the impact of the eurozone crisis.

“There is a continued negative impact on sentiment and consumption from the ongoing eurozone crisis, and recent data and reports from China indicate a cooling economy and subdued demand conditions,” Saraf stated.



China, despite accounting for considerable copper demand, failed to achieve double-digit growth in consumption for the first time in 2011.



Meanwhile, following a 17% rise in 2011, GFMS believed that prices could “struggle to register significant and sustained gains” in the short term, leading to a weak first half of 2012.

The company forecast copper to reach about $8 305/t during the first half of 2012 and achieve a yearly average price of $8 475/t.

Saraf said that, while unlikely, there was the possibility of the copper price “retesting” the $9 000/t level later in 2012, underpinned by improving demand and continued monetary easing in Europe, North America and China driving investment in the copper market. However, he believed the market would struggle to sustain any further significant gains, given the current backdrop of heightened macroeconomic concerns and risks.

“The fact is that, in spite of weak macroeconomic and fundamental signals during the early part of this year, the copper price has so far remained well supported above $8 000/t,” said Saraf.

By: Natasha Odendaal

Edited by: Mariaan Webb