Wednesday June 6, 10:54 am Eastern Time
Copper rally seen on hold until final quarter
LONDON, June 6 (Reuters) - Output losses have been rightly ignored by the world copper market, but prices may rise sharply later this year if demand revives, Bloomsbury Minerals Economics (BME) said.
Strikes in South Africa and Chile had failed to raise market interest despite coinciding with a mine cutback announced by Kennecott Utah Copper and job cuts at the Phelps Dodge (NYSE:PD - news) Tyrone facility in the United States. In the May edition of its Copper Briefing Service, the London-based analyst said it saw prices moving sideways in the short term as the full impact of the global economic slowdown had yet to be felt and that
demand would also soften in the third quarter for seasonal reasons. ``Longer term, a sharp turnaround in consumption combined with the removal of surplus concentrates stocks from the picture should lead to a rapid price escalation from the fourth quarter of this year,'' it added.
BME said demand weakness was largely linked to stocks, but these were being run down and a sharp revival in consumption was probable provided the world economy picked up significantly. U.S. copper demand had likely reached a floor and a modest economic rebound there was seen having benefits elsewhere later this year.
After rising by just 1.8 percent in 2001, global copper demand was expected to post a 5.1 percent increase in 2002. If consumption forecasts proved correct the market would not record a surplus in any year in the current economic cycle. It predicted a modest 42,000 tonne deficit in 2001, followed by a 274,000 tonne shortfall next year.
London Metal Exchange cash prices were seen averaging $1,757 a tonne this year and jumping to $2,314 in 2002. On Wednesday they were indicated at $1,670.
REFINED OUTPUT GROWTH SEEN SLOWING
BME said recent mine production cuts had not altered significantly its refined production forecast for 2001, but added that mine output was not sufficient to underpin the current level of cathode output. The 250,000 tonnes of concentrates and blister stocks accumulated in 1999 and 2000 were expected to be eroded in 2001. Without these stocks to fall back on, a projected 5.6 percent rise in mine output next year was seen translating into a more modest 3.6 percent increase in global refined output, compared with a forecast 4.3 percent rise this year. |
