Copper supplies will lag demand for at least the next two years, with prices peaking over $10,000 a metric ton in the second quarter next year, according to Trafigura Beheer BV, which considers itself the world’s second-largest trader of industrial metals.
Copper will move from a balanced market this year to shortages of 800,000 tons in both 2011 and 2012 at current prices, Simon Collins, head of refined metals at Trafigura in Lucerne, Switzerland, said in an interview yesterday. That’s even before demand climbs as exchange-traded funds backed by the metal are introduced, he said.
Such funds “will result in higher prices, which in turn will affect price-sensitive demand and price-sensitive supply,” Collins said. “Consumers are concerned about an ETF. Inventories are already relatively low.”
Copper prices are up 21 percent this year, and reached a record $8,973.50 a ton today, partly as manufacturers and other buyers who anticipate shortages build inventories to meet demand for next year, Collins said. Imports into China, the world’s largest consumer, typically are strongest in the second quarter, helping to boost copper prices and leading gains in lead, nickel and aluminum, he said. Copper stockpiles tracked by the London Metal Exchange have slid 30 percent this year.
In 2006, the copper market was also forecast to have a large deficit when higher prices brought the market further into balance than originally estimated, Collins said. If prices rise, next year’s deficit may be only 400,000 tons, he said.
Trafigura trades about 1 million tons of copper a year, Collins said. Glencore International AG is the largest trader of industrial metals, according to Trafigura estimates.
Trafigura is preparing for more metals demand by customers and increasing its warehouse capabilities through its subsidiary NEMS, with plans to expand in the U.S. next year for the first time with storage facilities in Baltimore and New Orleans, as well as in China, Collins said. He declined to give an estimate of the investment.
Copper demand may rise if JPMorgan Chase & Co., BlackRock Inc. and ETF Securities Ltd. start ETPs backed by the metal, in line with plans announced by all three companies in October.