COPPER the only metal with a PHD recorded its worst slide since July 2015. The red metal slide 4.2% to USD6,547 per metric ton -10 week low- as China’s manufacturing pulse slows to 5 month lows. Other factors driving the decline of the strategic asset were a 5.85% rise in warehouse inventories to 192,550 tons. China is key factor in determining demand for copper as it consumes over 43% of global production.
Last week a gauge of manufacturing activity in China, responsible for nearly half of global consumption of the metal, declined to the lowest in five months in November, but factory managers’ views of the outlook for the next 12 months fell to the lowest level in more than five years.
In a research report released on Tuesday 06 December, Capital Economics predicts copper prices will edge lower over the next (6) months as “optimism about China’s demand fades and both mine supply and refined production revive”:
After falling to US$6,250 per ton in June 2018, we expect the price of copper to pick up on the back of strong growth in new sources of demand, particularly electric vehicles and renewable energy. Prices could reach USD7,000 and USD8,000 per metric ton at end-2018 and end-2019 respectively, up from USD6,700 per metric ton today.
Capital Economics estimates that 2017 will record the first decline in copper mine supply since 2005 as a result of disruptions at the world’s largest copper operations including Escondida in Chile, a joint venture between Rio Tinto and BHP, and Grasberg in Indonesia, owned by Freeport McMoRan.
Capital Economics predicts a 3.5% drop in primary copper supply this year, but a recovery to 2.8% growth in 2018 as world number two producer Peru add some 300,000 in new production and mines like Norilsk’s Bystrinsky mine in Russia ramp up output. Industrial action in Latin America, particularly in Chile, and more onerous environmental regulations could crimp expected production growth however.
The research firm expects modest 2% output in growth in 2019, but points to numerous projects coming on stream in coming years, including at Rio’s Oyu Tolgoi operation in Mongolia, First Quantum’s Cobre Panama mine and in Zambia where Glencore is expected to restart operations after refurbishing its Mopani mine.
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