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Gold/Mining/Energy : Mining News of Note -- Ignore unavailable to you. Want to Upgrade?

To: LoneClone who wrote (41913)	8/20/2009 7:24:07 PM
From: LoneClone	Read Replies (1) \| Respond to of 194002

GFMS sees copper prices up each year out to 2012 I-Net Bridge Published: 2009/08/19 10:37:37 AM businessday.co.za COPPER prices, on an average annual basis, are expected to increase each year out to 2012, precious and base metals consultancy GFMS said today. Copper has been at the forefront of the rally in the base metals sector with the cash quote more than doubling from the low of $3,051/ton to a recent high of $6,419/ton. While prices have slipped by around 5% since then, GFMS's latest analysis on the copper market suggests that the downside potential is limited given the underlying fundamentals. "Strong Chinese consumption coupled with expectations for a recovery outside of the country to commence late in the year has led us to revise our projections for demand to show marginal growth for the full year in 2009," said GFMS in a statement on its three-year copper forecast. "Our forecasts for production, in contrast, remain more or less unchanged. As a result, we have reduced our forecast of the likely surplus for 2009 to just 245,000 tons from our earlier estimate of 441,000 tonnes," it said, adding that the 245,000 ton surplus forecast for the year does not, in its view, necessarily contradict the decline in LME inventories registered this year-to-date as much of that material found its way into unreported inventories, largely in China. As these inventories begin to weigh on the local market, the consultancy expect imports into China to fall, resulting in LME stocks beginning to once again rise. "Indeed, in our view this has already started, with initial import data for July (which covers both metal and products) showing a 15% m-o-m decline. Coupled with some profit-taking by investors, this will drive a decline in copper prices in the short-term," GFMS said. "Nevertheless, as the trends in supply and demand are clearly suggestive of a noteworthy improvement thereafter, this is expected to be short lived, with funds and end user front-running triggering a move to deficit in 2010, setting a positive trend for the price from Q4 this year," the consultancy said. It added that it would not be surprised to see prices topping $6,500/ton and generating a Q4 average of US$6,000/tonne, resulting in a full-year figure of $4,900/ton. Inevitably, the focus of the market in late July, early August has been on the impact of investment funds, but GFMS said there has been support from the underlying fundamentals with the tightness stemming from the shortage of concentrate. GFMS forecasts that global concentrate production will decline by 1.6% this year following no growth in 2008. Latest developments in spot treatment charges reflect this situation, and the decline in spot treatment charges is sending "bullish" long-term signals to the copper market. A strong recovery in consumption coupled with slower mine production (and by implication refined production) growth are the architects of the 88,000 ton deficit forecast for 2010. In addition to the direct impact of the improvement of the fundamentals on prices, the swing of the market to deficit – as well as the improvements in the wider commodities complex – is also expected to trigger additional investor interest in the metal, which will further boost prices. Copper cash prices are forecast to top $7,500/ton, averaging US$6,500/ton in 2010. The deficit is expected to persist throughout the rest of the forecast period, and its magnitude in fact grows in 2011 and 2012, to 121,000 tons and 176,000 tons respectively. GFMS said it should be noted that not all of the inventory reduction would take place on the LME as it is believed that there has been a build of unreported inventories within China. Therefore its supply-demand balance projections suggest that LME inventories will trend lower over the forecast period but may not reach the levels of under 100,000 tons briefly seen in the recent bull market.