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Trafigura expects balanced copper; alumina oversupply

Keywords: Tags  Trafigura Beheer, copper, alumina, concentrates, Simon Collins, Shivani Singh

SINGAPORE — The copper market is expected to remain in balance next year, while alumina, which has been in structural overcapacity since 2007, is forecast to remain that way for the foreseeable future, according to Simon Collins, head of nonferrous and bulk commodities at Trafigura Beheer BV.

"New production (of copper) is coming on-stream and supply will increase in 2014-15, but low inventories and (gross domestic product) growth should support prices," Collins said in Amsterdam-based Trafigura’s annual report Dec. 16.

Collins does not expect copper prices to rise markedly, but said a price collapse also is unlikely since concentrates are trading at close to cost levels for some producing areas.

The market for copper has been tight in recent years, with concentrate producers struggling to meet production targets, he said. "Globally, copper inventories are low, with most stock held in China. But new mines are now being developed, and the markets for copper and its concentrate may be on the verge of a sea change.

"At the end of the financial year, maintenance shutdowns by smelters in the Western World, comfortable concentrate stock levels at Chinese smelters and a weak Chinese sulfuric acid market reduced demand for concentrates and pushed treatment and refining charges up to three-digit levels," he said.

Meanwhile, a general lack of volatility restricted alumina trading opportunities this year, and the overcapacity will continue to keep the market challenging for some time, Collins said. "Oversupply drove down domestic prices in China and alumina imports fell by more than a third."

China accounts for 50 percent of global alumina production, but remains a net importer due to the country’s expansion in smelting capacity.

The alumina market has undergone structural changes in the past three years and "producers now price longer-term contracts off an agreed index based on the spot market at the time of delivery rather than as a percentage of the aluminum price," Collins said. This change has shifted price risk exposure from alumina producers to smelters, he added.

A version of this article was first published by AMM sister publication Metal Bulletin.

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