Copper Deficit to Remain on Demand From China, Pan Pacific Says

Mar. (Bloomberg)-Copper may stay in a deficit for a third straight year as demand from China, the world's biggest consumer, remains intact even after the country cut its growth target, Japan's top producer said.

Demand will likely exceed supply by 47,000 metric tons in 2012, the smallest deficit in three years, from last year's 400,000 tons, said Akira Miura, executive officer of the marketing department at Pan Pacific Copper Co. That would be the third straight yearly deficit, he said.

China cut its economic-growth target to 7.5 percent from an 8 percent goal in place since 2005, a signal that leaders aim to cut reliance on exports and capital spending in favor of consumption. Copper, used in wires and pipes, has climbed 9.1 percent this year on speculation manufacturing from China to the U.S. may expand and European leaders will work to contain the region's debt crisis. Higher prices benefit producers such as Codelco, Aurubis AG and Freeport-McMoRan Copper & Gold Inc. (FCX)

"China's revision is realistic and from now we will see a pick-up in demand," Miura said in an interview March 5. "China's demand is never weak."

Global refined output may grow 6.7 percent to 20.56 million tons in 2012 from 2011, while consumption is expected to increase 4.8 percent to 20.607 million tons, Miura said. Metal for three-month delivery was little changed at $8,294.50 a ton on the London Metal Exchange at 2:37 p.m. in Tokyo.

Copper demand will grow no less than 6 percent this year, Tongling Nonferrous Metals Group Co., China's second-biggest producer, said today. Barclays Capital on Feb. 16 predicted a third consecutive annual shortage in global supplies in 2012.

'Not a Forecast'
"In the case of China, it is important to remember that 7.5 percent is a target, not a forecast," Nick Trevethan, a senior commodities strategist at Australia & New Zealand Banking Group Ltd., said today. "Last year the target was 8 percent and we saw growth of 9.3 percent. This year we expect China to grow by 9 percent," he said.

Stockpiles tracked by the LME are down 24 percent this year to the lowest level since August 2009. Yesterday they dropped for a ninth session to 283,575 tons. Orders to draw the metal from inventories, or canceled warrants, fell 1.6 percent to 95,025 tons. Metal equaling 34 percent of LME copper inventories now awaits delivery.

The stocks-to-consumption ratio for the refined market will remain close to a record low of just above two weeks, which should in turn maintain relatively good support for prices near the $9,000 a ton level, Barclays said on Feb. 16.

Apparent consumption of copper in China rose 8 percent to 8.2 million tons in 2011, compared with a 4 percent increase in 2010, while output rose 16 percent to 5.5 million tons in 2011, versus a 15 percent advance in 2010, Miura said.

Copper consumption growth in China may rebound in the next few years on accelerating demand from the renewable energy sector and special industries, according to Nexans SA (NEX), the second-largest cable and wire maker, said on Feb. 23.