Tuesday, December 31, 2013

"Copper Supply in Focus as Market Moves to Surplus"

LME  7,387USD/t
From Mineweb:
As with most commodities, the copper market was driven by China in 2013 and there is every reason to believe the Asian giant will remain in the driver's seat in 2014.

But, while China remains the driver, 2014 could well mark the year the metal switches from the demand car to the supply car as Chinese consumption levels peak and new sources of supply come on stream.
According to Wood MacKenzie's Sophie Chung, total copper consumption is expected to grow at around 4% per annum over the next five years, with China being the main user.

Speaking at Mines and Money in London earlier this month, Chung explained that, while Chinese demand is expected to remain robust over the coming years, "based on how China has grown since 2000, we expect its peak consumption rate to peak in 2013, just below the peak rates of Germany, the US and Japan."
This is in contrast to the supply side of the picture which was, according to Natixis, surprisingly good in 2013 – mined output rose around 8% during the year as new mines such as Oyu Tolgoi and Ministro Hales came online and production from Collahuasi and Escondida surprised on the upside – and likely to get better in 2014.

But, while mined output rose over the year, a variety of smelting issues meant that refined copper was harder to come by, which explains the rise in both treatment and refining charges and physical premiums.
According to Natixis, the combination of both the imminent arrival of as much as an extra million tonnes of mined output per year and the tightness currently on display accounted for the moderate rise in prices to around $7,200/tonne.

But, it says, “Through the course of 2014, additional smelting (and SX/EW) capacity should come on-stream, helping to facilitate a rise in refined copper production and taking the market into a gradually expanding surplus. This should ultimately limit gains in copper prices, although the tightness of the market could push spot prices higher in the very near term."

Wood Mackenzie believes that this surplus should last until around 2017, reflecting the various new projects that are coming online....MORE
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