Global Copper Demand Won't See A Recovery Until 2011 -CS1-15-09 12:37 AM EST
news.morningstar.com
SYDNEY -(Dow Jones)- Global copper demand probably won't see much of a recovery until 2011 because of lower global GDP forecasts, a marked slowdown in China's consumption growth and modest supply in the near term, Credit Suisse said in a note Thursday.
Many analysts still expect a recovery in prices in the second half of the year, based on the view that economic stimulus plans will boost demand for raw materials.
Credit Suisse has lowered its 2009 copper price forecast by 30% to US$1.75 a pound and its 2010 forecast by 25% to US$2.25/lb.
Copper prices have more than halved since the start of 2008, but mine closures or production curtailments have so far been rare.
Global demand is expected to contract this year by around 1.4%, followed by another weak year for copper consumption growth - with world growth excluding China at 0.5% and China at 6.9% - before increased infrastructure spending translates into more demand for the metal used in construction, electrical wiring and tubes.
"We think efforts by the Chinese government to provide an economic stimulus will meet with modest success, and the forecast recovery in China's copper consumption should be sufficient to lift consumption growth to 2.3% in 2010 and 4.2% in 2011," said Credit Suisse.
On the upside, copper supply issues like falling ore grades and a lack of new discoveries remain firmly in the picture, which should limit production surpluses.
For instance, Rio Tinto PLC (RTP) said Thursday that fourth-quarter output from its part-owned Escondida mine in Chile, the world's largest copper operation, tumbled 36% on year, and it warned that production would continue to be impacted through the first half of 2009 by falling ore grades and electrical issues.
"We are anticipating surpluses in 2009-10 that are modest in comparison to the 2001 slowdown, in which the copper market surplus blew out to 3.1 weeks of consumption," said Credit Suisse.
-By Elisabeth Behrmann, Dow Jones Newswires; 61-2-8272-4689 elisabeth.behrmann@dowjones.com
(END) Dow Jones Newswires
01-15-090037ET |
