Small supply deficit is followed by a large surplus on the copper market

by David Fleschen

The copper price is quoted at USD 9,300 per ton and has thus worked its way back to the middle of its trading range of recent weeks between USD 9,500 and USD 9,000. The new forecasts of the International Copper Study Group at least did not prevent this, as the outlook for 2021/2022 had something for optimists and pessimists. The price found support in the reassessment of the current year: instead of a supply surplus of 80 thousand tons, the ICSG now expects a small deficit of 42 thousand tons, because demand exceeded supply, especially in the first months. tGlobal demand, on the other hand, is expected to stagnate because strong demand growth outside China (also as a result of the corona-related slump in the previous year) is offset by an apparent decline in demand in China - due to lower imports.

The outlook for 2022, on the other hand, does not provide much upward momentum for prices, as the ICSG is forecasting a full supply surplus of 328 thousand tons, which is three times as much as was expected in the spring: The key factor is a significant increase in mine production and also in the production of copper refining (just under 4% in each case). After only 2 major copper mines had started operations in the last four years, a whole series of new projects is now expected to come on stream, so that the availability of copper concentrate should increase significantly. One indication that this is indeed the case at the moment is the already rising smelting and processing charges. The expected growth in global copper demand of just under 2.5% in the coming year, which has been slightly downgraded compared with the spring, will thus be significantly exceeded. Given the prospect of an oversupplied market, we expect a lean period before the copper price should benefit from its positive medium- and long-term demand outlook next year.

Source: Commerzbank Research, Photo: Fotolia

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