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World Supplies of Copper and Aluminium to Shrink in 2014, 2015

Tuesday, 21 Jan 2014 09:40 AM

Surplus stocks of copper will tighten significantly this year and next as new mine output fails to translate into refined metal, helping buffer prices from the impact of slow economic growth and uncertain Chinese demand, a Reuters poll shows.

Aluminium also faces a smaller surplus, although the market's particular backdrop of metal use for collateral in financing deals is not about to change anytime soon.

Prices have struggled, while the premium paid over cash prices to obtain metal from storage is hitting records.

The Reuters survey showed the copper market balance is expected to narrow to a surplus of 260,500 tons this year, smaller than 328,000 tons predicted for 2014 in a similar poll last quarter.

Next year, analysts predict the surplus will tighten further to 235,500 tons.

Some 33 market participants surveyed in the past month expect cash copper prices to average $7,013 a ton this year, down from 2014 forecasts in a previous poll in October of $7,050 a ton, and 4 percent lower than 2013 average prices of $7,321.57.

In 2015, copper prices are seen averaging $6,854.50 a ton.

"There is a bottleneck in the market where the new mine supply is not feeding through into new refined copper," said Nic Brown, head of commodities research at Natixis.

Analysts said that supply disruptions due to port strikes in Chile and an export ban on unprocessed ores from Indonesia were also keeping the market tight.

"2013 was a reasonably good year in terms of fewer supply disruptions, a trend that may not continue in 2014, particularly given the uncertainty from the Indonesian ore export ban," said James Glenn, analyst at National Australia Bank.

Weighing on the market is a weak outlook for demand from top consumer China, where a slowdown in the economy has led to concerns about weaker commodity-intensive infrastructure spending.

China's economy narrowly missed expectations for growth to hit 14-year lows in 2013, with growth in investment and factory output flagging in the final months of last year.

China's consumption of copper accounts for as much as 40 percent of global refined demand.

ALUMINIUM SURPLUS SHRINKS

Analysts predict a tightening surplus in the aluminium market. The surplus this year is seen at 568,400 tons compared to an oversupply of 591,747 predicted in a previous poll.

Cash aluminium prices are seen averaging $1,840 a ton this year, according to 31 analysts, down from previous forecasts of $1,885, and slightly lower than average 2013 cash prices of $1,844.95 a ton.

Next year aluminium prices are seen at $1,984.10 a ton, coinciding with a further tightening of the surplus to 500,000 tons in 2015.

The biggest gainer for the year is expected to be zinc, which is seen averaging $2,050 this year, up more than 7 percent from 2013 prices, before rising further to $2,200 in 2015.

The galvanizing metal, which was the best base metal performer for 2013 after ending the year down 1.2 percent, is expected to be underpinned by production shortfalls and appetite for using the metal as a financing tool.

Zinc's surplus is also seen tightening from 96,000 tons in 2013 to 17,500 tons in 2015.

Analysts expect to see gains for lead and tin due to those markets' deficit structure over the next two years. Lead prices are expected to average $2,226 in 2014, up 4 percent from 2013 prices, while tin is seen averaging $22,842.50 this year, up more than 2 percent from last year.

Nickel prices are seen at $14,837.50 a ton this year, down around 1 percent from 2013 prices as the market grapples with a weak stainless steel market, but any declines are likely to be capped by the ban on unprocessed ore exports by Indonesia, the world's largest exporter of nickel ore.

Prices are expected to recover to $15,800 in 2015.

© 2017 Thomson/Reuters. All rights reserved.

 
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Surplus stocks of copper will tighten significantly this year and next as new mine output fails to translate into refined metal, helping buffer prices from the impact of slow economic growth and uncertain Chinese demand, a Reuters poll shows.
copper,ore,metal,demand
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2014-40-21
Tuesday, 21 Jan 2014 09:40 AM
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