Copper May Flip Into Shortage This Year After Surplus, Standard Bank Says

Copper consumption will outpace supply this year by 58,000 metric tons as demand increases and supplies are disrupted, compared with a previous forecast for a surplus, Standard Bank Plc said. 

The bank revised its estimate last month of a surplus of 153,000 tons. The metal will have a shortage of 199,000 tons next year and about 457,000 tons in 2012, analyst Leon Westgate said in a report. Standard Bank said prices will average $8,700 a ton in 2012. It raised its 2011 lead and tin forecasts from last month, and cut estimates for aluminum and zinc. 

A “robust demand outlook for the fourth quarter, low stock levels, supply disruptions, a weak dollar” and improved risk appetite are positive for copper, Westgate wrote. Developing economies in Asia and a tightening concentrate market are also bullish longer-term, the bank said. 

Copper has surged 26 percent since the end of the second quarter, partly as stockpiles tracked by the London Metal Exchange dropped to the lowest level in almost a year. The U.S. Dollar Index, a six-currency gauge of the greenback’s strength, last week slumped to the lowest level in more than eight months. A weaker U.S. currency makes dollar-priced metals cheaper in terms of other monies. 

Copper for delivery in three months traded at $8,228 a ton at 11:16 a.m. on the LME. Prices are up 12 percent this year and yesterday reached the highest price since July 2008. Standard Bank maintained its copper forecast for this year and next at $7,375 and $7,900, respectively.

Long Way

“Copper prices have come a long way very quickly, and may suffer a pull-back or a period of consolidation in the short term,” Westgate said. “We nevertheless maintain our bullish stance towards the metal as the market looks towards continued economic growth in 2011 and supply concerns that loom on the horizon.” 

Standard Bank cut its 2011 aluminum forecast 3.2 percent to $2,430 a ton, and introduced a 2012 estimate of $2,510, and raised its 2011 lead outlook 1.2 percent to $2,480 and said the metal may average $2,590 in 2012. The bank maintained its nickel forecast for next year at $24,800 and said the metal will average $25,100 in 2012. 

Tin will average $25,000 a ton next year, up 7.8 percent from a previous forecast, and will average $26,100 in 2012, Standard Bank said. It cut its 2011 zinc estimate 3.9 percent to $2,450 and said prices will average $2,750 the following year. Source: Bloomberg