Pan Pacific Sees Copper Surplus at 5-Year High on China

World copper supply may outstrip demand in 2014 for the second straight year to a five-year high as mine output increases amid slowing demand from China, the world’s biggest user, according to Japan’s top producer.

Supply will exceed demand by 643,000 metric tons next year, the highest since 2009, compared with 143,000 tons this year, said Yoshihiro Nishiyama, senior executive officer in the marketing department at Tokyo-based Pan Pacific Copper Co.

Copper has lost 12 percent this year while inventories almost doubled as demand dropped amid slowing growth in China and Europe’s debt crisis. An increase in supply may further depress prices that entered a bear market this month, cutting costs for manufacturers including Sony Corp. (6758) and Honda Motor Co.

“The slowdown in China’s consumption growth is the key factor for the global surplus next year,” Nishiyama said in an interview yesterday. The country’s consumption will decline 2.5 percent next year, he said.

Copper for delivery in three months on the London Metal Exchange was at $6,955 a ton at 5:51 p.m. in Tokyo. Stockpiles monitored by the LME rose to 678,225 tons on June 24, the highest since 2003, and were at 610,725 tons today.

China’s leaders pledged at a Politburo meeting this week to maintain steady second-half growth while pressing on with economic reforms. Gross domestic product rose 7.5 percent in April-to-June from a year earlier, down from 7.7 percent in the first quarter, extending the longest streak of sub-8 percent expansion in at least two decades.

Goldman Sachs Group Inc. projects a surplus of 257,000 tons in 2013 and 392,000 tons in 2014, according to a July 24 report. Morgan Stanley forecast a deficit of 70,000 tons in 2013 and a surplus of 420,000 tons in 2014, according to a July 1 report.

Mine Output

New and expanding mine output including Oyu Tolgoi in Mongolia, Kamoto and Kov mines in the Democratic Republic of Congo and Caserones, Collahuasi and Escondida in Chile, will add 742,000 tons in 2013 and 990,000 tons in 2014, Nishiyama said.

World production of refined metal will increase 7 percent to 21.9 million tons in 2014 from 2013, while demand will grow 4.5 percent to 21.3 million tons, Nishiyama said. The output forecast included an estimated loss of 6 percent by supply disruptions, including the Garfield smelter in the U.S., the Tuticorin smelter in India and the Gresik smelter in Indonesia.

Output at Indonesia’s Gresik smelter is expected to decline by between 30,000 tons to 40,000 tons following an accident at the Grasberg mine in May, Nishiyama said.

To contact the reporters on this story: Jae Hur in Tokyo at jhur1@bloomberg.net; Ichiro Suzuki in Tokyo at isuzuki@bloomberg.net

To contact the editor responsible for this story: Jarrett Banks at jbanks15@bloomberg.net

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