That followed Antofagasta's (LSE:ANTO) decision to suspend development of its Antucoya copper project on concerns about its capital intensity and operating costs. Antucoya was expected to produce about 80,000 tons of copper per year over 20 years, starting in 2015.As some mines increase their output and other mines that were set to come online are delayed, analysts on average still expect a 120,000-metric-ton surplus this year, according to a Reuters poll. “I don't see the price (and) the market conditions being very different from 2012, with a supply-demand that is tight and with a few doubts in the second half if more copper is going to come into the market or not … which could cause a slight surplus,” Antofagasta CEO Diego Hernandez told Reuters last week. Paul Dewison, director of base metals at consultancy BME Copper, an Intierra Resource Intelligence unit, told Copper Investing News that it is worth keeping in mind that official plans for output normally look much higher than what miners are actually able to produce as there are always disruptions to production. “There's always a general expectation that plans will slide, some will be cancelled — there's nothing unexpected about it.” Rather, to get a good sense of where copper prices might be headed, it is more useful to look at the demand picture, he said. “Numbers for demand and supply are high on both sides of the equation, but we don't think that demand is going to do great things this year,” Dewison said. “US construction is not so bad, housing starts are starting to pick up and in Japan there is supposed to be a lot of work related to reconstruction after the tsunami; but elsewhere, the main story is China,” and the expectation for growth there, in the 4.5 to 6 percent range, “isn't that high.”
“Construction [in China] is carrying on, but we're talking about relatively small increases in investment in construction, so you begin to have to look at the manufacturing sector, where domestic demand looks okay — but how good are exports likely to be? If you look at the overall picture, you can't see phenomenal growth in China,” Dewison said.He is forecasting a 300,000-ton copper surplus this year and an average price of $7,750 per ton — or $8,000 in the first half and $7,500 in the second half. In comparison, Morgan Stanley expects copper prices to rise to $8,544 per MT, or $3.88 per pound, up from $7,952 in 2012. By 2014, however, the price is expected to decline again, to $8,157 per MT, and then to $7,496 per MT in 2015, Bloomberg reported. Overall, Morgan Stanley expects demand to exceed supply by 17,000 MT this year. Meanwhile, HSBC raised its 2013 copper price forecast to an average of $8,000 per ton from its previous $7,500 forecast, stating that the market “remains balanced in our view, and this is good enough to keep prices high when sentiment is good,” Reuters reported. Fitch Ratings estimates that copper consumption will grow about 4 percent both in 2013 and 2014, while supply will grow at about 3 percent, which it expects will result in “fairly balanced markets.” “Prices are down from peaks in 2011 following improved supply, but prices remain volatile,” Fitch Ratings said in its 2013 base metals outlook report earlier this month. “Long term, should new supply disappoint while recovery in the industrialized nations strengthens, deficits could persist, requiring higher prices to clear the market.” While supply isn't the only variable that drives prices — general investor sentiment and global economic growth prospects play a large role too — it may be prudent to remember that when copper supply last exceeded demand, in 2009, the average price of copper sold on the London Metal Exchange was $5,164 per MT and the average COMEX price was $2.3654 per pound.
On Thursday, copper for three-month delivery briefly peaked at $8,291 per MT in London, reaching its highest level since October. COMEX copper was trading at $3.7465 per pound in New York.Securities Disclosure: I, Ragnhild Kjetland, hold no investment interest in any company mentioned in this article. Chile Sees 2013 Copper Production Boost Contributing to Global Surplus from Copper Investing News