Citigroup Sees No ‘Significant Wave’ of Copper Supply Looming

  • Supply-driven bearish sentiment probably temporary, bank says
  • Peruvian rampup key driver of increased supplies in first half

The world is not about to be swamped by copper, according to Citigroup Inc. Growth in supply will fall significantly short of demand through 2020, tempering the bearish sentiment that’s made copper the worst-performing metal this year.

Global copper mine supply will be 1 million metric tons a year higher by the end of the decade, Citigroup analysts including David Wilson said in an e-mailed note Tuesday. That’s less than the 1.6 million tons of demand growth that Citigroup predicts. The metal used in wires and cables has risen only 1.6 percent this year, much less than its peers on the London Metal Exchange, as mine supply increased in the first half.

The supply-driven bearish sentiment in the copper market is “likely to be temporary in nature,” the analysts wrote. “We do not believe such growth represents a significant wave of supply.”

The view contrasts with Barclays Plc, which argued last month that copper will come under pressure as supply outweighs demand every year through 2020. Goldman Sachs Group Inc. sees a “supply storm” brewing with about 1 million tons of incremental supply through the first quarter of next year. For Citigroup, mine output won’t grow quickly enough through 2020 after years of spending cuts, constrained project funding and a decline in ore grades.

Rising supply in the first half has been driven mostly by the ramp-up of mines in Peru, Citigroup said, but growth there is poised to slow and will peak by 2019. On a global basis, “without already agreed funding, copper projects are, in our view, unlikely to reach production this decade given the current low price levels and capital constrained environment,” the analysts wrote.

Copper has fared poorly this year by comparison with zinc and nickel, which have risen 41 percent and 18 percent respectively. The metal traded at $4,779 a ton by 3:57 p.m. in Shanghai.

— With assistance by Martin Ritchie

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