During March, copper prices dropped to $6,667 per metric ton (mt, $3.01/lb) from $7,149/mt ($3.18/lb). That amounted to a 6.7% decline for the month, and several times during March the price dropped below the $3/lb threshold to as low as $2.92/lb. At the beginning of the year, copper was trading at $3.32/lb. Year-to-date, copper prices are down about 10%. In the October 2013 Markets column, E&MJ reported the International Copper Study Group’s forecast for an oversupplied copper market in 2014. Despite copper production interruptions at some major mines, softening demand appears to support that forecast.

Source: London Metal Exchange - Copper Prices
Source: London Metal Exchange

In its Metals Review—First half 2014, Natixis Commodities Research echoed those sentiments. The report explained that during the fourth quarter last year and much of the first quarter this year, spot copper prices were supported by perceived physical scarcity. Over the remainder of 2014 and into 2015, the market’s perception is likely to shift emphatically toward surplus, Natixis said. The softness is attributed to higher copper treatment and refining charges (TC/RCs), fewer smelter outages and greater availability of scrap. The supply of refined copper is expected to increase more rapidly than mine output this year. As the market moves to price-in the new copper surplus, Natixis explained, the forward curve is expected to push into a sufficient contango to support the financing trades, which will absorb this excess metal. Under such circumstances, spot prices are likely to remain under pressure.

By 2015, the group is projecting a new dilemma for copper markets. The market will face the prospect of a potential supply shortfall (or at the very least significantly higher costs of production) in Chile over the coming five to 10 years, Natixis said. Against this backdrop, they expect spot copper prices to remain under pressure for much of the 2014-2015 period, with the forward curve progressively steepening. A gradually strengthening U.S. dollar is also negative for copper prices. Natixis is forecasting average copper prices in 2014 of $6,750/mt, to be followed by $6,350/mt in 2015.

In related news, Metal Bulletin has launched a Copper Concentrates TC/RC index on a cif Asia-Pacific ports basis. The index, the first such price in the copper concentrates market, will be published twice monthly.

The TC/RC index was published for the first time on March 14 after a year of consultation with the industry, at a value of $91.88 per dry metric (dmt) compared with $65.52/dmt on June 15, 2013.

Metal Bulletin intends the index to be a fair and representative price for TC/RCs based on a clear specifications, and backed by a robust methodology. “Copper TC/RCs reflect the balance of supply and demand for copper concentrates, and are the first point in the copper production chain that value can be captured,” Metal Bulletin Editor Alex Harrison said.