Copper: Global Market Deficit

Commodities , Copper , Metals Sep 25, 2012 No Comments

CopperRefined copper market remained in deficit during the first half of 2012, show the latest figures published by the International Copper Study Group (ISCG). For the first half of the year, the deficit was 473 000 tonnes, after seasonal adjustment, 292 000 tonnes. In June, preliminary data show a copper deficit of 36 000 tonnes. However, taking into account seasonal variations, the market shows a surplus of 19,000 tons.

The apparent refined copper balance for the first half 2012, including revisions to data previously presented, indicates a production deficit of 473,000 t (a seasonally adjusted deficit of 292,000 t). This compares with a production deficit of 131,000 t (a seasonally adjusted surplus of 56,000 t) in the same period of 2011.

In the first half of 2012, world mine production increased by 2.4% and world refined production increased by 3.8% compared with the same period of 2011.

From 2002 to 2008, the average annual increase in mining production was 2.7%. Consequently, overall global production has only increased by 18% in 10 years, peaking at 16 Mt in 2011. Declining metal content in the ore, accidents and increased number of social conflicts have combined to slow the growth. During this decade the production of refined metal increased 28% to 19.7 Mt, while its consumption increased by 31% to 19.9 Mt. With demand rising to 5.1 Mt, China‘s share of global consumption jump from 18% in 2002 to 40% in 2011.

Until the end of the year, demand will be the key to whether base metals in general and copper specifically can maintain a rally. “We think the short covering that has fueled much of the recent strength in prices could take them higher still and further tighten nearby spreads in the short term,” Barclays Capital indicates. “Copper supply has been improving, but is still underperforming because analyst projections were again too optimistic,” Barclays concluded.

Today, copper futures marched higher on reports that metal users in China are stockpiling supply ahead of a week-long national holiday in October and support from a weaker dollarThe metal for delivery in three months climbed as much as 0.8 percent to $8,244 a metric ton on the London Metal Exchange. December futures rose 0.4 percent to $3.7445 a pound on the Comex. January-delivery contract rose 0.3 percent to 59,230 yuan ($9,397) a ton on the Shanghai Futures Exchange.

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Pascal Blanc

Pascal has implemented numerous software solutions in the areas of procurement, sourcing, spend management, supplier evaluation and performance. His clients include Fortune 500 companies in Europe, Asia and North America. He is a co-founder of Source & Procure.

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