By Steve Fiscor, Editor-in-Chief

Copper Forecasts for 2011 (000 mt)
  2009 2010 2011
Mine Production 15,877 16,235 17,076
Refined Production 18,356 19,081 19,293
Refined Usage 18,190 18,882 19,729
Balance 166 200 -435
Source: International Copper Study Group (Forecast 2010-2011)

The spot LME copper price is quickly approaching $4/lb. During the last year copper prices are up about 34% and a little less than a third of the gain (10%) occurred during the past month. Copper prices reached these levels during June 2008 before giving way to the global economic crisis. Today, however, the gains look sustainable for the near term.

The International Copper Study Group (ICSG) believes the copper market could move from a small surplus in 2010 to a deficit situation of -435 kt in 2011. The forecast is based on surging Chinese demand and tight supplies. Copper prices are expected to remain strong, at current levels or better, for the next several years.
The ICSG’s Statistical Committee met during September in Antofagasta, Chile. Government delegates and industry advisers from most of the world’s leading copper producing and consuming countries discussed key issues affecting the global copper market.

According to ICSG data, the refined copper market balance for 2010 could show a slight surplus of 200,000 metric tons (mt). Growth in copper supply for 2010 is expected to essentially match the growth in copper demand. The copper market for 2011 is expected to show a deficit of about 435,000 mt, as increased economic activity is expected to boost demand in copper end-use markets faster than the growth of refined production. While industrial demand in 2010 is expected to increase significantly in all of the major consuming regions, copper market off-take in the China-dominated Asian market, the leading global refined copper market, is expected to only increase slightly. In 2009, China’s apparent consumption increased by 38%, significantly exceeding the estimated growth.

Operational constraints and cutbacks instituted in 2009 combined to constrain mine production in 2010 to 16.2 million mt, about a 2% increase from that in 2009. Capacity utilization rates are expected to remain unchanged at only about 81%.

Though tabulations indicate mine production in 2011 will increase by about 800,000 mt (5%), it is expected the actual increase will be lower as the significant level of production disruptions from project delays, technical problems, and labor and political unrest that has become the norm in recent years is expected to continue to reduce output.

World refined copper production for 2010 (adjusted for production disruptions) is therefore projected to increase by only about 4% to 19.1 million mt. In 2011, it is anticipated that refined production will again increase only slightly as a shortage of concentrates, based on projected adjusted mine production, is expected to continue to restrain growth.

Though the current global economic crisis has significantly reduced world refined copper usage levels, ICSG expects world apparent refined usage in 2010 to increase by about 3.8% from that in 2009 to 18.9 million mt, about a 1 million mt increase from ICSG’s April estimate. The majority of the revision was attributed to stronger than anticipated apparent consumption in China, and a 6.6% growth in end-use demand in the European Union, up from 3.9% projected in April. In 2011, refined usage is again expected to increase in all major world markets, with global demand expected to rise by about 4.5%. Industrial demand growth for copper in China, which is based on anticipated semi-manufacture production, is expected to grow by about 6% in 2011.

In 2012, the market is expected to be more closely balanced, as an increase in refined copper production is expected to more than keep pace with sustained growth in overall demand.