Copper May Rise to $3,500 a Ton, Sumitomo Metal Says
By Chia-Peck Wong
Jan. 12 (Bloomberg) -- Copper for immediate delivery in
London may rise about 10 percent to $3,500 a metric ton in the
second quarter as smelters close for maintenance, sapping supply,
said an official at Japan's No. 3 producer of the metal.
Smelter shutdowns in the first half may remove about 350,000
metric tons of copper from the global market, Kotaro Tomino, an
executive officer at Sumitomo Metal Mining Co.'s copper and
precious metals unit, said by telephone. The 350,000 tons would
amount to 5.3 percent of world refined copper production of 6.6
million tons in the first half of 2004, according to Lisbon-based
International Copper Study Group.
``Demand is strong and supply is tight, and there are so
many smelters having maintenance in the first half,'' he said. He
declined to elaborate.
The concentration of smelter shutdowns, which typically take
place for about a month every one or two years, comes after an 88
percent slump in copper inventories at London Metal Exchange
warehouses. Falling stockpiles and surging demand in China, the
world's biggest user of the metal, helped drive copper prices 41
percent higher on the spot market in London.
Global copper demand rose 5.5 percent to 16.4 million tons
last year, according to Standard Bank Group analyst Robin Bhar.
Spot copper rose to $3,303 a ton last October, the highest
since September 1990. It was bid at $3,155 a ton and offered at
$3,157 a ton at 9:55 a.m. Singapore time, from yesterday's close
of $3,184 a ton. Inventories fell 275 tons to a 14-year low of
47,975 tons, the LME said yesterday.
Norddeutsche Affinerie AG, Europe's largest copper refiner,
this week said any shutdowns or maintenance at smelters worldwide
would worsen a supply shortfall of finished cathodes used to make
electrical wiring and plumbing.
Possible
Spot copper reaching $3,500 a ton ``is possible, as most
people are forecasting that copper prices will post new highs in
the first half of this year,'' said Shen Haihua, vice president
of Southwest Futures Co. in Shanghai, over the telephone.
``If economic growth in the U.S. continues to accelerate and
China keeps growing as well, it's possible for prices to reach
that level,'' he said. The U.S. is the world's second biggest
copper user.
Spot copper on the LME may rise next week as those who had
built short positions in October for metal for delivery in three
months are unlikely to deliver, said Shen. Investors build short
positions by selling securities they don't own, betting prices
will fall by the time they need to purchase to make delivery.
``Spot markets in London and Shanghai are supported by tight
supply. I'm sure most of them who sold LME three-month back in
October don't have stocks to deliver,'' said Shen.
Closures
Sumitomo Metal Mining plans to shut its Toyo smelter -- the
company's only copper smelter in Japan -- for 30 days between May
and June, said Tomino.
The smelter's production capacity this year should reach
365,000 tons after the maintenance shutdown. Last year, it
produced around 270,000 tons of copper cathodes, he said.
Mitsubishi Materials Corp., Japan's second-largest copper
smelter, plans to shut its Naoshima smelter for about three weeks
in May, the first time since 2003, spokesman Toru Suzuki said in
a telephone interview from Tokyo. Suzuki said he couldn't say how
much output would be affected as the company is still planning
this year's figures. The plant has an annual production capacity
of 220,000 tons.
Jinlong Copper Co. in China is planning to shut its smelter
for 50 days between March and April, Tomino said. The smelter
produced about 158,000 tons last year, he said. Jinlong Copper is
a venture between Tongling Nonferrous, China's second-largest
copper producer, China's Pingguo Aluminum, Sumitomo Metal Mining,
Sumitomo Corp. and Itochu Corp.
Copper prices may fall in the second half of the year as
supply catches up with demand, Tomino said.
Sumitomo Metal Mining forecasts demand in China, the world's
biggest copper user, will rise 11 percent to 3.9 million tons in
2005, Tomino said.
Jiangxi Copper Co., China's biggest copper producer, expects
copper output to remain around 420,000 metric tons next year,
Chief Financial Officer Du Xinmin said two months ago. The
company plans to close its smelters for maintenance in November,
he said.
--Editor: Richardson, Langan |
