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Copper price expected to fall, possibly test $6 000/t as supply surges – GFMS
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8th April 2014
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TORONTO ( – 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%, 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%, 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 in mid-March.

“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.


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% 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.

The growth in refined output was more lacklustre, rising a comparatively modest 3% to 20.7-million tonnes. The report found that this reflected a number of dynamics, including technical problems at some smelters processing material from new mines, logistical issues and stockpiling of concentrates in remote locations. Maintenance shutdowns at key smelters and limited scrap availability were also key contributory factors.

GFMS reported that global copper consumption, meanwhile, posted an “impressive performance” last year, rising 4%. This was a noteworthy improvement on the largely flat performance seen in 2012 and represented the fastest pace of expansion since 2010.

A fast acceleration in Chinese demand growth, to 9% in 2013 from 4% in 2012, was a key driver of the gain, and an improvement in the mature economies also added a degree of support to the global total.

Overall, Thomson Reuters estimated that all end-use sectors recorded gains last year, with the most noteworthy seen in the electrical and electronic products sector (6%), driven by the ongoing expansion in the Chinese power utilities sector.

Global exchange inventories fell by 83 000 t in 2013, with drawdowns concentrated in the second half. This compared with Thomson Reuters’ estimated market surplus of 49 000 t last year.

The apparent mismatch was attributed to a shifting of material to off-exchange locations within China over late 2013, a trend that continued into early 2014.

Indeed, Shanghai bonded warehouse stocks have increased over recent months, reversing the drawdowns that took place during early and mid-2013, while material was also believed to have accumulated at other coastal cities, amongst other locations.

A critical factor leading to this stock shift was the ongoing demand for copper for financing purposes, concerns over the sustainability of which contributed to a sharp sell-off in copper prices in mid-March, the report has found.

Despite Thomson Reuters seeing the most likely scenario as a continuation of such activities, albeit likely on a smaller scale than previously, such worries had added to the downside risks facing the copper market in light of prospects for improved metal availability going forward.

Given copper’s downbeat short-to-medium term outlook, a downside bias is expected to be maintained, with prices likely to test the $6 000/t level over the second half of 2014.

Edited by: Creamer Media Reporter


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