Copper Market May See Shortage of Supplies for Third Year on China Demand - Bloomberg

Copper will remain in short supply for a third straight year in 2012 as China-led demand boosts prices, Japan’s top producer said. Demand will likely exceed supply by 495,000 metric tons in 2011, the biggest deficit since 2004, compared with 214,000 tons last year, said Akira Miura, executive officer of the marketing and raw-material department at Pan Pacific Copper Co., Japan’s biggest producer. The shortage may shrink to 31,000 tons in 2012, he said.

Copper, used in wires and pipes, has climbed 18 percent in the past year, reaching a record $10,190 a ton in February, as the global economy recovers from its worst recession since World War II. Higher prices benefit major producers such as BHP Billiton Ltd. (BHP) and Freeport-McMoRan Copper & Gold Inc. (FCX) The metal is favored by Goldman Sachs Group Inc. because of its “superb supply-demand fundamentals.”

“Even though the market deficit will decline sharply, tightness will continue because of a lower stockpile-to-use ratio,” Miura said in an interview on Sept. 1. The global- inventory ratio may decline to a 1.3-month level in 2012 from an estimated 1.4 this year and 2010’s 1.8, he said.

Global output may increase 1.7 percent to 19.5 million tons in 2011 and 6.2 percent to 20.7 million tons in 2012 with new smelting capacity in China, Miura said. Demand may grow 3.1 percent to 20 million tons this year and 3.8 percent to 20.7 million tons in 2012, he said.

Supply Disruptions
“Copper-supply disruptions will amount to at least 8 percent of total production loss this year, compared to 4 percent to 5 percent we had expected earlier in the year,” Goldman analysts Sal Tharani and Sandeep SM said in a report dated Aug. 31. Read More ...