The supply cuts have helped lift prices for the industrial metal from more than six-year lows reached on worries about demand from China, the world’s largest copper consumer.
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Everyone’s anxious about the state of copper demand, particularly in China, which accounts for about 45 per cent of global usage. Three-month London Metal Exchange copper ended flat at $US5,186 a tonne versus a previous close of $US5,185.
The impact of the country’s economic slowdown was highlighted by data showing German exports for August marked their sharpest fall since the global financial crisis.
The data prompted funds to sell according to traders.
Goldman’s base case is that copper ends this year at $4,800 and next year at $4,500, but Max Layton, head of European commodities research, told a conference on Thursday prices could overshoot lower. “It has also been extremely volatile as people have shifted positions very rapidly”.
Market sentiment took a further hit when Canaccord Genuity cut its target stock price for mining giant Glencore citing a lower commodity price outlook.
Inventories monitored by the LME have fallen for the past nine days and since August 28, stockpiles have dropped 18 per cent. That’s a reversal of the trend from most of this year in which warehouse stockpiles doubled on less demand from China.
ICSG forecasts copper market to end in supply deficit of 130,000 mt in 2016, as against its earlier forecast of 230,000 supply surplus predicted in April 2015. Tin closed up 1.8 per cent at $US16,025.
Copper for December delivery, the most actively traded contract, was recently up 1.7% at $2.3950 a pound, the highest price since September 21. Consider the latest forecasts from the worldwide Copper Study Group (ICSG).
Most of the full closures have been among small operators with high costs such as Aura Minerals’ Aranzazu mine in Mexico, Revett Mining’s Troy mine in the USA and First Nickel’s Lockerby mine in Canada.
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Goldman said it expected copper and aluminum prices to decline from current levels over the coming year but left its 2016 outlook for both the metals unchanged. And rather than expecting another 228,000-tonne surplus next year, it is now projecting a 127,000-tonne supply deficit. But the ICSG notes that “underlying “real” demand growth in China is estimated by others at around 3-4 percent”, down from a figure of 4.5-5.0 percent used back in April.
