Cochilco, a Chilean copper company, has sharply raised its price forecast for this year in anticipation of a short-term shortage in the global market.
Cochilco raised its average copper price forecast for 2021 to $4.30 a pound from $3.30 in January.
The average price of copper next year is expected to be about $3.95 per pound, up from a previous forecast of $3.00 per pound.
Marco Riveros, executive vice president of Cochilco, said expected short-term supply shortages and reduced inventories on metal exchanges would provide basic price support. The refined copper market is expected to have a shortfall of 145000 tons by the end of 2021 and a surplus of 46000 tons by the end of 2022.
"the macroeconomic situation in the major copper consuming economies for the rest of 2021 is positive for metals. Under the influence of the rising unemployment rate in the United States in March, fiscal policy and expansionary monetary policy, the depreciation of the US dollar continued to consolidate downwards. "
"on the other hand, the global supply of copper concentrate is still very low, resulting in minimum processing fees and refining volume. While China will continue to boost demand, the growth in refined copper imports will be moderate during 2021. "
Total demand for refined copper is expected to be 24.2 million tons this year, an increase of 3.4% from 2020, as countries other than China recover from consumption losses last year. Further growth is expected in 2022, with refining demand increasing by 3.8 per cent to 25.1 million tonnes from the 2021 forecast.
Global mine copper production is expected to grow by 2 per cent a year this year to 21 million tonnes as a result of a broad recovery in major copper-producing countries. Chile's production is expected to rise 1.8 per cent year-on-year to 5.8 million tons.
However, some risk factors may lead to price fluctuations, such as the recent uncontrolled increase in the number of Covid-19 infections in India and the potential inflation risk in China.
Chile and Peru, two leading copper producers, are still struggling to overcome the impact of the Covid-19 pandemic, Cochilco said.
"there are also complex political and tax factors that, once achieved, may affect the future level of mining investment in the two countries," the agency said. "
A mining fee is being considered in Chile, which was endorsed by the House of Commons earlier this month, with critics saying the tax increase could drive away investment. The bill will now be submitted to the Senate for further consideration.
In Peru, presidential candidate Pedro Castillo proposed similar measures in his manifesto.
