Copper-Surplus Forecast Cut in Half

NEW YORK, Aug. 20 -- Strong Chinese consumption and expectations of an economic recovery later this year should help reduce the global surplus of copper to approximately 245,000 tons this year, nearly half what was previously expected, London-based consultancy group GFMS Ltd. said Wednesday.

    "Copper has been at the forefront of the rally in the base metals sector," GFMS wrote in a note.

    The firm still sees a decline in copper prices in the short term, due to a decline in inventories at the London Metals Exchange and some profit-taking by investors.

    "Nevertheless, as the trends in supply and demand are clearly suggestive of a noteworthy improvement thereafter, this is expected to be short-lived, with funds and end user front-running triggering a move to deficit in 2010, setting a positive trend for the price from [the fourth quarter of] this year," according to GFMS.

    Before this year ends, copper prices should top $6,500 a ton, averaging about $6,000 a ton in the fourth quarter.

    For 2010, GFMS also expects a further recovery in consumption, which along with slower mine production should lead to a 88,000-ton deficit in 2010. It sees copper prices topping $7,500 a ton, and averaging $6,500 a ton in 2010.

    The copper deficit is expected to grow to 176,000 tons in 2012, and the firm also expects price increases to continue over the next three years.

    (Source: MarketWatch)