Higher demand from China, the biggest copper user, may help to absorb surplus metal this year as the market shifts to oversupply, according to a mining studies group in Chile, the world’s largest producer.
Copper supply will outpace demand by between 100,000 and 200,000 metric tons in 2013, Juan Carlos Guajardo, executive director of the Center for Copper & Mining Studies, said in a telephone interview from Santiago today. The copper market is bracing for a first surplus in four years on increased output from new and existing mines, the International Copper Study Group estimates.
“In previous years we faced an important deficit,” Guajardo said. “The question is whether the surplus is enough to put pressure on prices or the higher demand in China is able to absorb this transition to surplus.”
Global refined copper production will rise about 3 percent in 2013 as usage increases “slightly less,” he said. Demand from China will expand 5 percent to 6 percent this year and the country’s copper consumption will start to increase “in the near future,” he said.
Copper for three-month delivery fell 0.3 percent to $7,805 a ton by 3:30 p.m. on the London Metal Exchange, down 1.6 percent this year.
Mined copper output will increase 1.9 million tons this year, equal to 11 percent of last year’s production, Credit Suisse Group AG estimates. Rio Tinto Group’s Oyu Tolgoi mine, which starts in the second half of 2013 in Mongolia, 30 percent growth at Freeport-McMoRan Copper & Gold Inc.’s Grasberg mine in Indonesia and increased production at Escondida in Chile will boost global copper supply in 2013, according to Citigroup Inc.
“It’s true that we will have more production,” Guajardo said. “It was expected, but the year is still too young to say that we will have too much production. The key issue here is unexpected losses, disruptions,” which in past years reduced supply below initial expectations, he said.
Refined copper production will gain 6 percent this year, compared with a 1.5 percent increase in consumption, tipping the market into a 458,000-ton oversupply, the ICSG estimates.