Metals commentary: Copper demand to outpace supply, says ICSG

The following was released by the International Copper Study Group (ICSG) as part of its Copper Market Forecast. For more information visit www.icsg.org.

According to ICSG data, global growth in copper demand for 2011 is expected to exceed global growth in copper production and the annual production deficit, estimated at about 250,000 tonnes of refined copper in 2010, is expected to be about 380,000 tonnes in 2011. In response to prevailing high copper prices and increased end use demand, production increases are expected at operations curtailed following the 2008 economic crisis and, to a lesser extent, from startup of new operations.

Industrial demand in 2011 in all of the major consuming regions is expected to continue the upward trend begun in 2010 and exceed the growth in refined production. Following a year of extraordinary growth (38%) in 2009, China’s apparent consumption in 2010 grew by only 4.3% and accounted for more than 38% of global copper demand. In 2011, the growth rate is projected to be around 6%: an anticipated growth in semifabricate production and possible restocking of working inventories could be partially offset by greater reliance on direct melt scrap and potential drawdown of unreported inventories that likely accumulated in preceding years.

The ICSG recognized that numerous factors including the earthquake and tsunami in Japan, political disturbances in the Middle East and North Africa, changes in trade and monetary policies, and uncertain copper market off-take in the China-dominated Asian market create uncertainty, and that the global market deficit could vary from the projected figure.

Project projections taken together indicate that mine production in 2011 will increase by about 740,000 tonnes (4.6%); however, it is expected that the actual increase will be significantly lower as production disruptions from project delays, technical problems, and labour and political unrest that have become the norm in recent years are expected to continue to reduce output. World refined copper production for 2011 (adjusted for production disruptions) is therefore projected to increase by only about 3.5% to 19.7 million tonnes. In 2012, it is anticipated that refined production will increase by about 5% following continued ramp-up of projects.

ICSG expects world apparent refined usage in 2011 to increase by 4% from that in 2010 to more than 20 million tonnes. In 2012, refined usage is again expected to increase in all major world markets, with global demand expected to rise by more than 4%. In 2012, the production deficit is expected to narrow as refined copper production is expected to grow faster than
demand.