Copper will not trade as high this year as previously thought, with analysts downgrading their price forecasts as global growth for base metals slows from 2010, according to a Reuters poll.
However, the metal used in power and construction is seen climbing to $9,995 a tonne next year, buoyed by tight global supplies and hopes of firm demand from top consumer China.
The survey of 41 analysts was carried out over the last three weeks. Not all contributors responded to all questions.
The consensus of 40 forecasts showed the cash copper price would average $9,570 a tonne this year, compared with a January forecast of $9,663 a tonne. Those compare with an average of $7,543 for the London Metal Exchange's (LME) cash contract in 2010.
Benchmark LME copper hit a record high of $10,190 tonne in February. It is now around $9,629 a tonne, driven mainly by macro-economic sentiment due to the euro zone debt crisis and concerns over talks to raise the U.S. debt ceiling, a necessary move to avoid a potentially disastrous default.
“With current base metal prices already reflecting strong growth prospects for the emerging economies, we expect macroeconomic developments in the U.S. and euro area to be increasingly important,” Benjamin Westmore, commodity economist at National Australia Bank said.
Investors have also been closely watching developments in China, the world's top copper consumer, for demand signals after it did not follow its usual pattern of striding back into the market after its Lunar New Year break in February.
“The demand in the Chinese markets has not gone down, but China has started using its stockpiles of copper instead of importing the metal,” Commerzbank analyst Daniel Briesemann said. “But that will change, as recent data suggests that copper imports have increased over the last four months.”
China accounts for nearly 40 percent of global consumption, estimated at around 21 million tonnes this year. Copper imports in China snapped two months of decline to rise 9.9 percent in June.
Price forecasts in the poll varied from $9,136 to $11,000 a tonne for 2011. For next year, the range of 38 forecasts went from $8,157 to $12,000 a tonne.
SMALLER DEFICIT
Prices for copper, used in power and construction, have benefited from a tight market and supply disruptions, namely in top producer Chile.
The average of 24 forecasts showed the copper market would have a deficit of 343,150 tonnes this year, smaller than a 444,000 tonnes deficit forecast in January.
“While most analysts mis-focus on Chilean supply problems, mine supply growth is actually rising at a growing rate, particularly from Africa and China,” Societe Generale said, adding it projects mine supply to grow by 5.2 percent this year.
“Looking forward to 2012, we expect a surge of new mine capacity coming on stream, with mine supply growth accelerating to 7.3 percent.”
Survey forecasts varied from a 2011 deficit of 50,000 tonnes to one of up to 670,000 tonnes.
The copper market deficit is seen narrowing next year to 125,000 tonnes. Some analysts even forecast a surplus in 2012.
“We expect the market to remain in deficit this year and become more balanced in 2012,” Deutsche Bank said. - Reuters