SG:Copper surplus to pressure prices in 2013 - CRU Group
Reuters reported that global copper production is set to rise in the next 2 years leading to a surplus which will put pressure on prices in 2013.
Ms Christine Meilton chief consultant at CRU Group said that new copper production capacity would come on stream in North America and Australia in 2012 and 2013. We expect refined production to grow 4.3 percent a year on average until 2015.
Ms Meilton said that output growth would peak at 7% in 2013, whereas demand in 2013 is seen growing by 4.5%. Demand is forecast to show much more steady growth which is why we see the market moving from a deficit this year to surplus and then deficit. She said that excess supply would put pressure on prices in 2013 but not to the extent that it would jeopardize investment. We are still forecasting prices will dip below USD 9,000 per tonne but they will be above USD 8,000.
Ms Meilton said that China, which currently consumes 40% of global copper output and other developing countries, will be the main demand drivers. Obviously high prices are a danger and it needs to be careful of very high prices. But lower prices of aluminium CMAL3, which can in some cases be a substitute for copper, are unlikely to hinder demand.
She said that it is not a matter of we will have aluminum this week instead of copper. Investments will be needed. Obviously copper has got advantages in terms of power transmission it is much more efficient than aluminum. There was a risk some copper projects expected to come on stream in 2012 and 2013 will be delayed because of red tape, poor infrastructure and funding difficulties. It is all putting pressure on scarce resources and it can all lead to delays.
Benchmark prices for copper CMCU3 used in power and construction, hit their lowest level in more than five months last week at USD 8,504.50. They have recovered from there and were last at USD 8,786 but are still some way below the record high of USD 10,190 per tonne reached in mid February. Prices are way above the cost of production. All operating mines at the moment are making a lot of money.
