It's well known that many have been calling for a continued surplus in the copper market. However, some writers and analysts have said it's worth looking at other factors that could suggest the opposite — copper might be headed for a deficit sooner than we think.
When it comes to the copper market, analysts are always looking at whether there will be a surplus or a deficit. Of late, many have been calling for a continued surplus, including Thomson Reuters GFMS, which in October released an update to its 2014 copper survey, suggesting that it is unlikely the market will shift into deficit in 2015. Likewise, though the International Copper Study Group (ICSG) has revised its copper supply-usage forecast down substantially, the group is still definitely calling for a surplus. But as with most things, there is always a flip side. Indeed, there are analysts who argue that the copper market will face a deficit sooner than many think. Lower LME stocks The Financial Times reported on October 28 that copper stocks at London Metal Exchange (LME) warehouses have fallen by 55 percent this year, hitting 161,050 tonnes, or about three days' worth of global consumption. To be fair, that figure alone does not signify a copper deficit. As Haywood Securities analyst Stefan Ioannou has pointed out, the LME may be the most transparent inventory, but it's just one piece of the much larger copper market pie. However, the exchange is still a valuable indicator when looking at the copper market, especially when one buyer (rumored to be London's Red Kite Group) appears to be holding 50 to 80 percent of LME copper. In other words, it looks as if there are important players making strategic decisions to purchase copper of late, and it's worth considering whether a prediction for a tight market is driving those decisions. China (still) stockpiling Furthermore, it appears that China's State Reserves Bureau (SRB) is still stockpiling copper. After buying 200,000 tonnes of copper in March and April, when copper was at its weakest price in years, the Bureau recently placed orders for 150,000 to 200,000 tonnes of copper cathode, Reuters reported. The copper is set to be delivered in the final quarter of 2014 and at the start of 2015.