Copper Surplus to Shrink on Lack of Scrap, Bank of America Says

LONDON, Aug. 24 -- A copper surplus will shrink next year because of a lack of scrap supplies, according to Bank of America Securities-Merrill Lynch.

    Supplies will exceed demand by 54,000 metric tons next year compared with a surplus of 393,000 tons this year, analyst Michael Widmer in London said in a report today. Copper for immediate delivery will average $4,730 a ton this year and $7,000 next year, according to the report. The metal was at $6,135 a ton by 1:30 p.m. on the London Metal Exchange.

    "The dynamics in the scrap market are one driver behind our expectation of a declining surplus in the refined copper market in 2010," Widmer said. "Tight scrap supplies are set to limit the scope for a large rise in refined output."

    About 40 percent of copper metal comes from recycled materials because it’s cheaper to re-use metal than dig ore out of mines, according to the Bureau of International Recycling.

    The slump in global manufacturing amid the worst global recession since World War II has reduced supplies of scrap from plants and factories, Widmer said.

    Copper prices have doubled this year as imports climbed in China, the world's largest copper user. Imports were a record 378,943 tons in June, according to the customs office. Some scrap buyers in China were forced to buy refined metal instead and may have to purchase more, Widmer said.

    (Source: Bloomberg)