Import cutback by China to loosen copper supply

Prices, however, are expected to slide from reduced demand

By Tom Stundza -- Purchasing, 1/23/2008 11:16:00 AM

World copper supply may loosen this year if Chinese analysts are correct in predicting that the country’s net copper imports may fall by 10% this year from 2007 to 1.22 million metric tons. Meanwhile, short-term copper prices have tumbled to a three-week low as fears of a looming U.S. recession continue to spark a global market sell-off of stocks and futures.

The subscriber-only NymexDirect newsletter says that Maike Futures Brokerages’ deputy general manager, Shen Haihua, told the recent 2008 Base Metals Market Outlook forum that full-year refined copper imports will be 1.32 million metric tons, down from 1.48 million in 2007, while exports may fall to 100,000 metric tons from 124,000 last year. Shen forecasts there will be a 12% growth in domestic production to around 3.89 million metric tons, which should absorb a projected 8% increase in domestic consumption to 5.13 million metric tons. (The 2007 copper consumption total was around 4.74 million metric tons, a 22% gain from 2006 use.)

Meanwhile, the world copper price fell today back toward a $3 annual price average. It had jumped to $3.13/lb on Tuesday because of the aggressive rate cut of 75 basis points by the Federal Reserve in a bid to prevent the economy from sliding into recession. The 2008 consensus forecast for copper cathode is closer to $3/lb than last year $3.25, a projection endorsed by Xavier Garcia de Quevedo, the head of Mexico's Mining Chamber of Commerce, who sees cathode averaging $3, according to the Denver Post.

The Globe and Mail newspaper in Toronto suggests that slowing growth in the U.S., the world's biggest economy, could hurt demand for metals. Industrial metals have been focusing on movements in global financial markets in recent weeks rather than on supply and demand fundamentals. “Fundamentals really had little to do with any of ... (the) moves,” Standard Bank said in a research note. “Instead, the metals again looked to technical signals, the rest of the complex and the wider global markets for direction.”

Like what you see?
This news item came from our Price + Supply Alert e-newsletter. If you would like to subscribe to this free weekly e-newsletter, CLICK HERE.