METAL MARKETS Copper to defy seasonal factors

The near future looks most encouraging for copper, reports Shearson Lehman Brothers in its latest quarterly report on the base metal. The New York company is forecasting that copper will continue to defy seasonal factors by maintaining the momentum of its recent price rally towards 80 cents (US) per lb, and any sustained weakening isn’t likely to occur until near the end of this year and into 1988.

Shearson cites a major shortfall of refined copper since 1984. “It is forecast that, thanks essentially to stronger than expected demand, producers will not (contrary to our earlier predictions) be able to ease the situation effectively until 1988,” the firm writes.

Not much hedge selling has been done by producers, Shearson reports. “In addition, it is possible that the base metal markets have begun to acknowledge the fact that not only have dollar prices been very poor, but that prices in other major currencies have been extremely, and perhaps untenably, low,” the firm writes.

The price of copper usually weakens during the second half of the year, a pattern Shearson expects the metal will not follow this year. A rise to $1 per lb is unlikely. The company’s “best estimate” is that copper prices will average around 76 cents during the last six months of the year, helping the average price for the year to reach 70 cents . (In 1986, copper averaged 62 cents .) Statistics revised

Statistics dealing with consumption of copper in the non-Socialist world in 1986 have been revised upwards. It is now estimated consumption grew by almost 6% last year to 7.74 million tonnes, a substantial revision. Consumption in the U.S., in particular, rose by 11.3%, almost 5% more than was earlier estimated. The U.S. and Japan were responsible for about 43% of the non-Socialist world copper consumption in 1986.

According to Shearson figures, the refined copper market was undersupplied during the 1984-86 period by one million tonnes, resulting in a large inventory decline.

Because of the weakness of the American auto and housing sectors, Shearson foresees a “noticeable, but not drastic” decline in copper demand. Also, demand will be lower in Japan, where the auto sector is somewhat weaker and the electrical sector will suffer because of the stronger yen. Demand elsewhere in the world is not expected to be strong enough to boost total demand this year.

As for production, Shearson is predicting an increase of 6.59 million tonnes in the non-Socialist world for 1987, with an additional 150 million tonnes being produced in 1988. While Europe and Africa are expected to perform poorly, the U.S. and China will boost production. Reasonable growth is predicted in Asia and expansion is expected for Australia and Papua New Guinea. Copper mine production in the non-socialist world in 1986 totalled 6.48 million tonnes.