prices are likely to fall in 2014, pressured by rising stocks
and production, as well as a strengthening U.S. dollar,
Citigroup Inc. analysts said in a note Nov. 18.
"We forecast (London
Metal Exchange) three-month prices to average $6,650 per tonne
for the year as a whole, and lows of below $6,400 per tonne to
be seen before year-end," the analysts said. "However, looking
further forward, the significant cutting back of the future
copper project pipeline suggests that a price of $8,000 per
tonne could be achieved by 2018."
suggests that the present run of copper supply growth will peak
between 2013 and 2014, and begin to dwindle markedly in 2016
"The slowing of mine
supply growth rates should be exacerbated by the postponement
of projects, which would have provided an additional 1.9
million tonnes of new mine supply in the second half of the
decade," the analysts said.
Inventory levels in
exchange warehouses, however, have fallen by more than 275,000
tonnes from the high of about 935,000 tonnes at the end of
June, the analysts said.
"Current estimates for
inventory held in Chinas bonded warehouse network are
also down by about 400,000 tonnes since the beginning of the
year," they said.
"One could point to
rising Chinese imports as evidence that Chinese real demand is
(rising). However, looking at Chinese sectors such as cabling
and wire rod production does not present such a positive
picture," the analysts said. "We also understand that the high
cost of borrowing seen in China since late April has (caused a
rise) in onshore financing demand, whereby corporates use
copper as a collateral tool to reduce interest rates on
This has intensified
the draw from LME-bonded and Shanghai Futures Exchange (SHFE)
warehouses, they said.
Beyond this, SHFE
stock draws have been driven by traders also shifting
inventories to off-exchange warehouses to benefit from lower
rental costsa trend that has been observed across all
base metals, they said.
On the supply side,
the copper industry is now in its fifth upturn since the
mid-1970s, according to New York-based Citigroup.
The analysts are now
forecasting copper concentrate supply growth will average
almost 8 percent this year. "We expect between 850,000 and 1
million tonnes of additional concentrate production to be added
to global production levels this year," they said.
Global refined copper
production is expected to accelerate further in 2014, with
growth of 4.4 percent compared with 3.2 percent this year.
A version of this
article was first published in AMM sister publication Metal