 "Copper heads for 5th year of decline")
The global copper market is heading for a fifth year of surplus and price decline in 2016. Demand growth, reined back by China’s continued slowing, meets with more than ample supply, a GFMS study said.
This forecasts a surplus this year of 150,000 tonnes. Though less than half of last year’s 363,000 tonnes, this does not herald an imminent return to deficit and a marked upturn in prices.
Instead, copper’s recovery will be rather lengthy, over a medium-term time frame, as the market continues to digest the long line of projects encouraged by the previous price boom. "In the remainder of 2016, we see potential for fresh weakness to take out earlier multi-year lows and expect prices to average $4,850/tonne. While the worst of the downturn will be over by the end of this year, only modest improvement to $5,100/tonne is expected in 2017, as a surplus of similar size is seen," said the report.
In 2018, the supply surplus is forecast to narrow to 60,000 tonnes and facilitate a low double-digit year-on-year price rise to $5,738/tonne. Still only two-thirds the 2011 annual average peak of $8,821/tonne.
As prices look set to head lower again, more curtailments to high-cost capacity seem likely but not on a sufficient scale to offset the ongoing, albeit slowing, build-up.
GFMS further estimates global refined output growth to remain subdued, below the average of around three per cent a year seen over the past decade. This will not be enough to right the market. China’s copper demand, 45 per cent of the total last year, held up better than expected but will continue to moderate as the transition to a consumer-based economy, hampered by an ailing housing sector, pegs back overall growth.
"This year, we forecast global demand to rise by 2.3 per cent, above last year’s weak showing of 1.9 per cent but still well below growth rates either side of four per cent seen as recently as 2013-2014," it said.
On a cumulative basis over the past four years, global refined output has exceeded consumption by at least 850,000 tonnes, with the 150,000 tonne surplus forecast for this year expected to take that figure beyond a million tonnes, said the report.
“It is only around the turn of the decade that the potential for a markedly tighter market looms, when the impact of new mines and expansions has dissipated, and cuts to capital and exploration spending come home to roost”
This forecasts a surplus this year of 150,000 tonnes. Though less than half of last year’s 363,000 tonnes, this does not herald an imminent return to deficit and a marked upturn in prices.
Instead, copper’s recovery will be rather lengthy, over a medium-term time frame, as the market continues to digest the long line of projects encouraged by the previous price boom. "In the remainder of 2016, we see potential for fresh weakness to take out earlier multi-year lows and expect prices to average $4,850/tonne. While the worst of the downturn will be over by the end of this year, only modest improvement to $5,100/tonne is expected in 2017, as a surplus of similar size is seen," said the report.
In 2018, the supply surplus is forecast to narrow to 60,000 tonnes and facilitate a low double-digit year-on-year price rise to $5,738/tonne. Still only two-thirds the 2011 annual average peak of $8,821/tonne.
As prices look set to head lower again, more curtailments to high-cost capacity seem likely but not on a sufficient scale to offset the ongoing, albeit slowing, build-up.
GFMS further estimates global refined output growth to remain subdued, below the average of around three per cent a year seen over the past decade. This will not be enough to right the market. China’s copper demand, 45 per cent of the total last year, held up better than expected but will continue to moderate as the transition to a consumer-based economy, hampered by an ailing housing sector, pegs back overall growth.
"This year, we forecast global demand to rise by 2.3 per cent, above last year’s weak showing of 1.9 per cent but still well below growth rates either side of four per cent seen as recently as 2013-2014," it said.
On a cumulative basis over the past four years, global refined output has exceeded consumption by at least 850,000 tonnes, with the 150,000 tonne surplus forecast for this year expected to take that figure beyond a million tonnes, said the report.
“It is only around the turn of the decade that the potential for a markedly tighter market looms, when the impact of new mines and expansions has dissipated, and cuts to capital and exploration spending come home to roost”