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Blog: Copper Likely to Remain Moderate

By Brooke C. Stoddard

Copper prices fell in April, the metal’s steepest decline since last spring. It closed April at $7,055 a metric ton (tonne). Since then it has tended upward, but expectations are that copper prices are going to remain low.

A report by Credit Suisse says that copper is headed toward $6,000 a tonne. According to the report, called Copper: Another One Bites the Dust and published last month, copper will be trading at the low end of the trading range of $6,000-$9,000 it has experienced over the last seven years.1

Credit Suisse sees three main factors behind its predictions for copper prices. For one, it believes the high prices in 2011 above $9,000 a tonne owed to unusual circumstances, namely especially high demand in China and weak supply growth. Second, it believes the weak global market as well as increased supply capacity will depress prices going forward. And third, by historic standards present prices are still lofty. Before a dramatic rise in 2002-2006, prices for copper were considerably lower.

The Credit Suisse report foresees moderate cooper prices for other reasons. It says that European recovery would be spotty at best and could not be considered much of a hope of spurring copper demand above supply. And Credit Suisse is optimistic about mine production. It sees mine supply growing this year at about 10 percent compared to demand growth running at less than half that rate, or about 3-4 percent.

The International Copper Study Group (ICSG) generally aligns with Credit Suisse. The ICSG said in an April statement that “for 2013, the copper market is expected to have a production surplus relative to demand.”2 The ICSG predicts world production of refined copper to be greater than demand by somewhat more than 400,000 tonnes. For next year, it expects a rise in demand but an even larger increase in supply from new and existing mines. Disruptions to its predictions, the ICSG said, could come from European sovereign debt problems, political troubles in the Middle East or North Africa, and any number of problems from labor unrest to utility troubles at mining operations. But in the summary to its Copper Market Forecast 2012-2014 it paid scant attention to these potentialities.

The ICSG believes world copper mine production will be 17.6 million tonnes and 18.5 million tonnes this year and next, reflecting annual growth rates significantly higher than in the previous half decade. It also says that refined copper will grow more than 4 percent to 21 million tonnes this year and grow even faster next year, more than 5 percent to 22 million tonnes. But it is pegging world demand at 20.7 million tonnes next year after anemic growth.

The Development Prospects Group of the World Bank generally agrees with the bearish predictions for copper prices. In nominal dollars, the World Bank sees average prices for 2014 at $7,400, for 2015 at $7,000, and for 2016 at $6,980, ending the decade at $6,899 in 2020. In 2005 real, or inflation-adjusted, dollars these figures would be: $5,896; $5,472; $5,359; and $4,936.3

1Copper: Another One Bites the Dust by Credit Suisse, April 2013
2ICSP, April 2013
3World Bank Development Prospects Group

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