Copper will extend a bull run as “mammoth demand” from China, the largest user, and supply constraints combine to drive the market into a deficit from next year until 2014, according to Standard Chartered Plc.
“We are seeing a serious reduction in the supply of copper at a time when demand is quite robust,” Michael Haigh, the bank’s global head of commodities research, said today in Seoul. “Copper will continue to perform incredibly well.”
Copper, used in pipes, advanced to within 5 percent of a record last month on increased demand, declining stockpiles and a weaker dollar. Factory output in China grew at the fastest pace in six months in October. Deutsche Bank AG said Nov. 2 that the metal’s outlook presented a “perfect storm” for bulls.
The “copper market, we believe, will be in deficit until 2013, maybe 2014,” Haigh said at a seminar. “Copper has really been an outlier in terms of its performance, but it is fundamentally driven.”
Three-month futures peaked at $8,940 a metric ton in July 2008, two months before the collapse of Lehman Brothers Holdings Inc. helped to pitch the global economy into recession. The metal, which touched $8,554 on Oct. 26, traded today at $8,499 at 3:46 p.m. in Singapore.
Jeremy Gray, Standard Chartered’s global head of equity research for resources, forecast in an August report that copper may rise to $12,000 a ton in the next two years. None of the seven largest producers will bring on any new production next year or in 2012, the report said.
The three-month contract in London may average $7,850 a ton in the fourth quarter compared with $7,282 in the third, according to slides from Haigh. The price may average $8,325 a ton in 2011 compared with $7,369 in 2010, the slides showed.
“Things are not looking very rosy on the supply side given Chile and Peru’s reduction in output,” said Haigh, who joined Standard Chartered in July. “We are seeing mammoth demand for copper from China and these two suppliers cannot keep pace.”
The copper market may turn to a deficit of 723,000 tons in 2011 from a surplus of 112,000 tons this year, with the gap widening to 1.2 million tons in 2012 and further to 1.5 million tons in 2013, according to Haigh’s presentation. The Lisbon- based International Copper Study Group last month forecast a 2011 deficit of 435,000 tons.
LME copper stockpiles stood at 366,075 tons yesterday, the lowest level since October last year, according to exchange figures. They have shrunk 27 percent this year.
The economy in China, the top consumer of raw materials from copper to soybeans, grew 9.6 percent in the third quarter. Refined-copper consumption in China may expand 11.5 percent to 6.8 million tons this year, Yang Changhua, a senior analyst at Beijing Antaike Information Development Co., said yesterday.
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