Reuters
Analyst warns of copper rationing as LME stocks wane
Sunday March 7, 7:06 pm ET
By Nicole Mordant
TORONTO, March 7 (Reuters) - Global stocks of copper held in London Metal Exchange warehouses could drop to zero by the middle of this year if recent blistering demand for the metal continues, a base metals analyst said on Sunday.
Greg Barnes of Canaccord Capital also forecast copper prices peaking over the next six to nine months, but warned there was a chance of rationing of the red metal by year-end if furious Chinese demand did not taper off as most analysts have predicted.
LME copper inventories have been dropping at the rate of 3,500 tonnes per trading day for some time, or close to 20,000 tonnes per week, as global consumption of copper -- widely used in construction and electronics -- outstrips supply.
"If this is maintained, LME copper inventories could be completely gone by mid-June, and who knows what type of prices there will be if that should happen," he told delegates at the annual Prospectors & Developers Association of Canada convention in Toronto.
Copper prices have soared 90 percent since the beginning of 2003 to last week, when the red metal hit an 8-1/2-year peak on the LME of $3,055 a tonne on a combination of strong demand to feed China's industrialization and limited supply, partly due to a series of output disruptions.
On Friday, stocks in LME warehouses amounted to 267,575 tonnes down 4,500 from the day before. Stocks have fallen almost without interruption since mid-December levels of 450,000 tonnes.
"We think that all the factors are in place to see copper prices peak in the next six to nine months," Barnes said noting rapidly falling inventories, supply disruptions such as recent rockfalls at the giant Grasberg copper mine in Indonesia and the potential for more strikes at mines in Chile during the summer.
He said most analysts expect Chinese copper consumption growth to ease off this year from recent annual levels of around 20 percent. But he warned of tough times ahead for copper consumers if analysts' assumptions were wrong.
"Effectively by the end of 2004 we will be talking about rationing copper just as the nickel market is now," he said.
Barnes said he expected the tight copper concentrate market to ease in the second half of the year on supply increases as world's No. 1 copper producer, Codelco, releases stockpiled metal into the market and Grasberg gets back to mining higher grade ore.
"If you are a copper producer, consumer or investor, we don't think this is the year to sell in May and go away," Barnes said. |
