Copper prices destined for record high

Allan Seccombe | Mon, 01 Feb 2010 14:29
[miningmx.com] -- COPPER prices are forecast to high record highs in the next couple of years with limited supply and increased demand from China and the 30 member countries in the Organisation for Economic Cooperation and Development (OECD), said Barclays Capital's Kevin Norrish.

Prices are forecast to average $6,875/tonne this year, rising to $7,000 next year and a high of $8,500 in 2012.

"All-time highs lie ahead," Norrish said at the Mining Indaba in Cape Town.

In the nearer term, copper could top $8,000/tonne in the first half of this year, he said, wiith the market surplus shrinking to 227,000 tonnes from 580,000 tonnes.

China is expected to import a million tonnes less copper this year as it cuts back on purchases of refined copper because of expanded domestic refinery capacity. It has also built up its stock levels of the metal.

The surprise in the market this year is the growth of demand in OECD countries. Growing demand there should offset the fall in Chinese purchases, Norrish said.

While some base metal markets saw a rapid pull back in production at the height of the global economic crisis in early 2009, copper producers cut back supplies by a smaller percentage.

Growth in zinc and lead production is expanding rapidly, Norrish said, with copper and nickel not growing as quickly. The new projects that are coming on stream in the next two years are relatively small compared to projects some years back. The biggest is Konkola Deep, which is adding 180,000 tonnes to supply.

The seven top copper producuers forecasts showed a decrease in capital spend on copper production from a peack of $40bn peak in 2008. "The outlook is depressed," Norrish said.

Looking ahead five years at forward prices, Norrish said the curve showed a $1,000/tonne gap towards the end of the period as the market is betting on increased supply not matching demand growth and is expecting higher prices.