By Liezel Hill
November 30, 2010
Copper prices will likely peak “well above” $11 000/t in 2013, supported by tight market conditions forecast for the next three years, metals consultancy GFMS said on Monday.
GFMS, which published the prediction in its quarterly three-year copper forecast report, expects an overall copper market deficit for 2010, and believes copper prices will rally through a series of all-time highs in the coming years.
The $11 000/t forecast would mean an increase of about one-third from the current price of around $8 200/t on Monday.
GFMS expects that an economic slowdown in the first half of 2011 will lower demand for copper, pushing the market briefly into a small surplus.
“Thereafter, the consultancy projects deficit conditions to re-emerge in the second half of 2011 and for these to remain in place over the following two years, as supply struggles to keep up with consumption,” a statement said.
The deficits are being forecast despite marked increases in production that are expected over the next couple of years, GFMS noted.
The high prices mean that miners will likely look at increasing output where possible and supply from secondary sources will also continue to increase.
But the trend towards increased supply will be partly offset by issues like political risks, declining grades at major copper mines and labour disputes.
Overall, GFMS expects refined copper production will increase by an average of 3,4% a year between 2011 and 2013.
At the same time, demand for the industrial metal will continue to rise, fuelled mainly by growth in emerging markets, GFMS said.
Chinese demand growth may slow compared with recent years, but, at an average of 6% a year, is expected to remain strong and will account for a little less than two-thirds of the global rise in annual consumption over 2010 to 2013, the consultancy predicted.
Copper prices will also likely be supported by ongoing investor interest, which will probably also result in high levels of price volatility, GFMS said.
“GFMS argues that the metal’s bullish fundamentals coupled with their expectation that the investor base for the wider commodities’ sector will continue to grow, will result in further inflows into the red metal over much of the foreseeable future,” the group said.
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