Copper to Swing to First Surplus Since ’09, Pan Pacific SaysJae Hur and Ichiro Suzuki
World copper supply may outstrip demand in 2013 for the first time in four years as mine output rises, according to Pan Pacific Copper Co., Japan’s top producer.
Supply will exceed demand by 199,000 metric tons, compared with deficits of 95,000 tons in 2012 and 132,000 tons in 2011, said Toshitaka Nakamura, senior executive officer for marketing in the joint venture between JX Nippon Mining & Metals Corp., a unit of JX Holdings Inc., and Mitsui Mining & Smelting Co.
Copper, used in electronics and automobiles, has lost 3 percent in the past year as demand dropped amid a slowing economy in China, the biggest user of the metal, and Europe’s debt crisis. A surplus may limit price gains, cutting costs for manufacturers including Panasonic Corp., Sony Corp., Honda Motor Co. and Toyota Motor Corp.
“With mine supplies increasing later this year, the market balance will shift to a surplus after shortages in the previous three years,” Nakamura said in an interview yesterday.
Southern Copper Corp., the most profitable producer of the metal, is trying to overcome community protests in Peru and labor unrest in Mexico to reach a goal of doubling output.
Copper will trade between $7,700 to $8,800 this year, Nakamura said. Copper for delivery in three months on the London Metal Exchange traded at $7,958.25 a ton at 3:53 p.m. in Tokyo.
Goldman Sachs Group Inc. said yesterday the metal is one of its preferred mining commodities and kept its average price forecast at $8,458 for 2013 and raising next year’s estimate to $7,250 from $7,017.
“The market will remain tight because the stock-to-consumption ratio will stay at a low level amid concern over labor disputes at some mines,” Nakamura said. The company projects the ratio at 1.4 months in 2013, compared with 1.3 months in 2012, he said.
Global output will increase 6.8 percent to 21.1 million tons in 2013, while demand will climb 5.3 percent to 20.9 million tons, Nakamura said.
Supply will exceed demand by 330,000 tons in 2013, compared with a deficit of 320,000 tons in 2012, Deutsche Bank said in its Jan. 8 report. Mine-supply growth is expected to increase significantly in 2013, exceeding 8 percent, a rate not witnessed for more than a decade, the bank said.
China’s copper output will gain 12 percent to 6.3 million tons in 2013, while demand will rise 5.7 percent to 8.5 million tons, Nakamura said. The country accounted 41 percent of global consumption in 2012, according to Pan Pacific.
China’s imports of the metal rose 14 percent to 4.6 million tons in 2012, according to data released on Jan. 10 by the Beijing-based Customs General Administration. Stockpiles monitored by the Shanghai Futures Exchange climbed to 209,096 tons last week, the highest level since the week ended April 20.
Inventories in China’s bonded warehouses jumped to 1 million tons from 500,000 tons to 600,000 tons in early 2012, Nakamura said. Bonded warehouses are exempt from tariffs and a value-added tax.
“Hefty inventories in China have forced some suppliers to ship the metal to other areas such as Rotterdam in the past months,” Nakamura said. Stockpiles in LME Rotterdam warehouses jumped six-fold to 16,575 tons from the end of August, according to data from the bourse yesterday.
In Japan, demand is expected to increase 12 percent to 1 million tons in 2013 on rebuilding after the 2011 earthquake and tsunami and the government’s stimulus package, while output will rise 0.5 percent to 1.52 million tons, he said.