Copper prices fell Thursday in the wake of signals from Codelco and Xstrata (LSE:XTA) that increased production may cause a drop in prices later this year. News of Chinese manufacturers' accelerated production, however, brought about a recovery.
“Despite the still tepid external demand, the domestic-driven restocking process is likely to add steam to China's ongoing recovery in the coming months,” HSBC's chief economist, Hongbin Qu,
in HSBC and Markit's Flash China Manufacturing Purchasing Managers' Index (PMI) survey. The PMI rose to 51.9 from 51.5, a 24-month high, according to the survey. The manufacturing output index also rose, hitting a 22-month high.
Additionally, Morgan Stanley analysts predict that copper prices will rise 7.6 percent, to $8,554 per metric ton (MT), or $3.88 per pound, from $7,952 in 2012. The forecast is based on anticipated demand increases from China, the US and even Europe, Bloomberg reported.
But both Chile's Codelco, the world's largest copper producer, and Xstrata (LSE:XTA) said this week that increases in copper production could result in lower prices at the end of this year. “Maybe there will be a certain element of downward pressure, albeit very slight, toward the end of the year when there will be a small surplus,” Codelco's CEO Thomas Keller told Bloomberg, echoing remarks made by Xstrata's chief operating officer, Steve de Kruijff, to ABC News.
On the London Metal Exchange, copper for three-month delivery rose 0.1 percent, to $8,108 per MT, from the $8,103 closing price on Wednesday. COMEX copper for March delivery was down 0.4 percent, at $3.6705 per pound, in mid-afternoon trade in New York.
Grupo Mexico (OTC Pink:GMBXF) plans to spend $2 billion on its mining division this year, a portion of which will go towards the company's Buenavista mine in Northern Mexico, which has the world's largest copper reserves. The company wants to produce 1.4 million MT of copper per year by 2015, Reuters reported.