{{The global copper market is expected to post a moderate surplus this year, which will result in copper prices remaining under pressure, the fifth instalment of Thomson Reuters’ ‘GFMS Copper Survey 2014’ has found.}}
The average yearly price was expected to fall below $7,000/t in 2014 for the first time since 2009, with a test of the $6 000/t level deemed likely over the second half, the report states.
Launched on Tuesday during the CESCO/CRU copper conference in the Chilean capital city Santiago, this year’s study noted how copper prices continued to exhibit a downside bias in 2013, as a sharp acceleration in global mine supply and uncertainties over the global economic recovery dented the red metal’s near-term prospects.
GFMS said that the copper market was in a largely balanced position in 2013, despite global mine output rising by 8 per cent, its fastest pace in more than a decade.
Robust demand growth, a tight scrap market and delays in processing concentrate into refined metal limited the size of the market oversupply.
Further, the stockpiling of refined metal within China over the closing months of 2013 also exacerbated the tightness in cathode availability. This helped place a floor under prices and inflated physical premiums as 2013 progressed.
On an intra-year basis, prices nevertheless still fell 9 per cent, pressured by the uptrend in global mine output. More recent concerns surrounding slowing Chinese economic growth and the sustainability of the copper financing trade saw prices weaken further to near-four-year lows.
“Whilst many commodities markets have been on the back foot of late, the copper market has been particularly susceptible to weakness given its heightened exposure to the Chinese market, through both traditional end-use demand as well as finance-related routes.
With the risks to the copper market skewed to the downside, against a backdrop of rising mine supply and modest market surpluses, prices are likely to remain subdued over the rest of this year,” GFMS senior base metals analyst Rob Smith said.
{{Rising supply}}
GFMS said that the copper market was now in the midst of a period of strong supply growth, as miners begin to deliver on investments made during the boom years.
Thomson Reuters estimated that global mine production grew by 8 per cent last year to 17.8-million tonnes, with Chile and the Democratic Republic of Congo making standout contributions.
In fact, mine production increased across all regions, boosted by higher productivity at major mines, ramp-ups and commissioning of new projects and expansions.
Looking ahead, mine output was set for a period of above-trend growth that would lead the copper market into surplus over the medium term, although it should be acknowledged that rising capital costs, easing prices and a shift in mindset amongst mining companies towards one of constraint, could lay the foundations for renewed tightness later in the decade, GFMS noted.
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