More on Copper..if it is possble to have tight labor and no inflation
..it is even more likely that reduced production and commodity inflation is just around the corner..spelling the end of the bonanza sweep-stakes..
NEW YORK, March 27 (Reuters) - Asarco Inc's estimate of the
1998 Western World copper supply deficit has inched upward over
the last seven weeks -- to 81,000 tons from the 69,000
projected to analysts in early February.
Based on slides used in Chief Executive Officer Richard de
J. Osborne's presentation to analysts in London Thursday the
increase reflects a trimming of the company's consumption
estimate which was more than offset by a cut in Western refined
copper supply.
Asarco has also raised its estimate of 1997 Western refined
supply, raising last year's supply surplus projection.
The slides show the company's estimate of the 1997 surplus
has gone from 15,000 tons in October, to 205,000 in early
February to 249,000 tons in late March.
Looking at this year's copper market Thursday, Osborne
projected that new mine supply of copper will grow by 889,000
tons, or 8.6 percent. However, total Western refined supply is
only expected to increase by 186,000 tons to 11,792,000 tons.
In early Feburary, Asarco projected 1998 supply at
11,857,000 tons.
Offsetting the 1998 growth in new mine supply are already
announced mine shutdowns and curtailments of 278,000 tons, a
decline in Western World copper scrap availability of 192,000
tons and an increase of 235,000 tons of copper imports by
China, Osborne said. Exports from the CIS and Poland are
expected to increase by only 2,000 tons from 1997.
"Overall then, we see a supply growth of 186,000 tons in
1998, substantially below the growth in mine supply," said
Osborne.
"We believe that the decline in copper inventory levels
that we have seen in recent weeks reflects the end of the
inventory effect of the Southeast Asia market decline that
began last summer, much stronger than expected consumption in
the United States and Europe and the return of the Chinese to
the market to meet their current consumption requirements."
Last year's Western World copper surplus of 249,000 tons
was not much more than China's internal stock drawdowns of
220,000 tons in 1997, the Asarco chairman noted. The Chinese
drew down inventories when copper prices rose rather than
import copper as had been expected, he explained.
"We believe that China will reimport at least 55,000 tons
of the strategic reserve material which was lent to the Western
market last July and at some point China may also decide to
replenish the balance of the 1997 inventory drawdowns of
165,000 tons.
"China continues to have a significant shortfall of
internally produced copper," he said. It will "need to import
296,000 tons of refined copper to meet its estimated
consumption of 1,778,000 tons in 1998."
He also said the worldwide copper concentrate surplus which
existed a year ago appears to have dried up.
One result, Osborne continued, is that the Chinese are now
trying to conclude long-term concentrate supply contracts and
have acquired a copper mine in Zambia to fill growing needs.
Scrap availability in Europe and the United States also has
declined significantly in the last few months and scrap supply
in the West is now very tight, according to Osborne.
"We expect scrap availability in the West will decline by
192,000 tons in 1998," he said.
In summarizing the supply-demand picture for 1998, Osborne
said Asarco now sees Western World copper consumption of
12,517,000 tons in 1998.
Seven weeks ago, he told the company's quarterly analysts
meeting in New York it saw demand of 12,533,000 tons.
"In estimating Western World consumption, we assume growth
in U.S. copper demand of 3.6 percent, compared with five
percent growth in 1997.
"We are using this lower estimate," he said, "despite
current evidence of a much stronger market. Demand from our
customers right now is very strong, the strongest we have seen
in recent years."
In Europe, Asarco estimates a growth of 3.2 percent,
compared with 3.8 percent in 1997. "We are experiencing a
strong demand there, as well," he said.
"Overall, our estimate is for growth in 1998 of 2.3 percent
which compares with three percent in 1997 and with a four
percent average growth for the last five years."
The estimates, Osborne noted, do not include the potential
for increased refined copper purchases if the copper
concentrates, blister and scrap markets continue to tighten.
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