Copper surplus of 328,000 tons seen by 2022

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    LONDON- The global refined copper market will be roughly balanced between supply and demand this year before moving into significant supply surplus in 2022.

    That’s the headline forecast from the International Copper Study Group (ICSG), which has just updated its twice-yearly assessment of the market’s statistical landscape.

    This year’s small supply deficit of 42,000 tons will be dwarfed by an estimated 328,000-ton surplus in 2022 largely on the back of a significant recovery in mine production.

    That fits with a broad consensus among analysts that after several years of stagnation global mine production will start growing again.

    Since this is expected to coincide with a deceleration in demand growth, particularly in China, there is no shortage of calls for copper to relinquish its lofty heights above $9,000 per ton, for a time at least.

    But copper supply has a habit of not performing to expectations, and not everyone is convinced.

    Goldman Sachs is sticking with its super-bull call for London Metal Exchange (LME) copper to hit $10,500 per ton by the end of this year.

    Everything, Goldman argues, depends on when the wall of mine supply actually arrives.

    Global copper mine production has largely flat-lined in recent years, notching up marginal growth of just 0.3 percent in 2020, according to the ICSG.

    That is forecast to accelerate to 2.1 percent this year and to 3.9 percent in 2022 thanks to a spurt of new mine projects.

    Only two major copper mines have entered production in the last four years, the Group notes, but five major projects will arrive by the end of next year – KamoaKakula in the Democratic Republic of Congo, Quellaveco in Peru, Spence-SGO and Quebrada Blanca QB2 in Chile and Udokan in Russia.

    Coupled with increased production from scrap, this mine surge should feed through into a similar-sized lift in refined copper production, outpacing demand growth next year.

    It’s worth noting, however, that the ICSG has lowered its 2021 mine production forecast from its last meeting in April, when it expected growth of 3.5 percent.

    Although new capacity has started ramping up, growth has been restricted by “a slower than expected recovery in Peruvian output, reduced SX-EW (solvent extraction-electrowinning) production in Chile, the temporary closure of SX-EW mines in Myanmar as well as lower head grades and operational issues at some mines”, the ICSG said. – Reuters