Copper prices have been supported by expectations of a mild improvement in seasonal demand and cutbacks to supply, despite ongoing worries over China’s growth.
Benchmark copper on the London Metal Exchange has slid almost a fifth this year, hitting a six-year low of $4,855 a tonne in August.
The impact of the country’s economic slowdown was highlighted by data showing German exports for August marked their sharpest fall since the global financial crisis. Chinese stockpiles in bonded warehouses, located in free-trade zones and not officially reported, dropped 22 percent last month, according to a Bloomberg Intelligence survey. “It has also been extremely volatile as people have shifted positions very rapidly”.
But copper prices are expected to recover a few losses, as shrinking inventories and planned output reductions cut a few of the supply on the global market.
ICSG’s revision follows similar moves across the industry, with Macquarie revising down 2016 supply of copper to a 272,000 mt deficit in its October 2015 Commodity Outlook. “The market is definitely tightening, even though the background of demand has been pretty weak in the first three quarters”, Bielski said.
But as Chinese markets reopened for business on Thursday, speculation about the health of the world’s no. 2 economy resumed, driving copper prices lower. Shanghai Futures Exchange copper closed the session up 2.3 percent. Tin was mainly steady at $16,030 a tonne.
Copper for delivery in three months declined 1 per cent to settle at $US5135 a ton at 5.50pm on the LME. Zinc fell 0.5 percent to $1,685 a tonne and lead slipped 0.1 percent to $1,672.5.
But Raevskiy said copper was building a price floor.
ICSG forecasts copper market to end in supply deficit of 130,000 mt in 2016, as against its earlier forecast of 230,000 supply surplus predicted in April 2015. And rather than expecting another 228,000-tonne surplus next year, it is now projecting a 127,000-tonne supply deficit. “If United States rates remain on hold for longer it gives them (emerging market currencies) a bit of respite… which would unleash pent up (metals) demand”, said William Adams, head of research at Fastmarkets. This is now expected to grow by just 0.8 per cent this year, compared with 7.0 per cent last year and an April forecast of 4.1 per cent.