Copper Price Outlook Hinges on Production Surplus, Says ICSG

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Looks like global copper production in 2013 is likely to outweigh copper demand, according to the International Copper Study Group (ICSG)’s latest forecast report.

The report said the gap could be as much as the amount of shortfall in copper global production in 2012. According to the ICSG, world demand for refined copper was expected to have exceeded production by about 420,000 metric tons in 2012. This was double the shortfall of 210,000 tons in 2011.

So obviously, with more copper seemingly flooding the markets than can be picked up, it may mean a fall in prices in the near-term, as per the report. The current global economic slowdown could also hammer down the prices further.

today's copper prices - MetalMiner IndXThe copper sector in India is happy with this forecast, because the country can benefit a lot from falling copper prices. Internationally, though, copper analysts seem divided on how the prices will eventually move in 2013.

RELATED: Read MetalMiner editor Stuart Burns’ recent take on copper ETFs.

A Goldman Sachs forecast said the metal may average US $3.62 per pound by April, and US $4.08 by July. BNP Paribas analysts also seem to go with Goldman, saying they anticipated copper demand to go up this year because of improvements in US housing and the construction sector in China.

Another report by Barclays said prices could average US $3.59 in 2013. The bank’s calculations were based on the fact that there are high stockpiles of copper in China and increased mine supply. Barclays did not seem to support higher prices unless there was some measure of support from China.

A report by Scotiabank intimated that mine delays in Peru and Chile, which account for more than 40 percent of the world’s copper supply, could push copper prices northwards in 2013 to about US $4.29 per pound. Incidentally, except for Chile, which largely produces low-grade ore, no region has experienced major production growth in 2012.

A majority of the analysts feel that China could play a significant role this year in the copper price movement, if prices have to stay between the US $3.50 to $4.00 per pound range.

Why the Production Increases?

The ICGS report cited several reasons for the increase in production.

today's metal prices - MetalMiner IndXContinued in Part Two.

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