A storm is about to hit the global copper market, according to Goldman Sachs Group Inc, which forecast that the price might slump to US$4,000 per tonne over 12 months as mine supply picks up, producers enjoy lower costs and demand growth softens.
“Company guidance and our estimates suggest that copper is entering the eye of the supply storm,” analysts, including Max Layton and Yubin Fu (傅玉斌), wrote in a report e-mailed yesterday.
A drop to US$4,000 would be a 17 percent slump from Thursday’s close on the London Metal Exchange (LME).
Copper has lagged gains seen in other raw materials so far this year, especially zinc and nickel, which have benefited from forecasts for global shortages.
For copper, there has been solid growth in global mine supply in the first half, and that trend is expected to pick up in the coming quarters, according to Goldman.
“This ‘wall of supply’ is expected to translate into higher copper smelter and refinery charges and ultimately, higher refined copper production, set against softening demand growth,” Layton and Fu wrote.
They forecast the metal at US$4,500 per tonne in three months and US$4,200 in six.
Copper for delivery in three months — which last traded at less than US$4,000 per tonne in 2009 — was at US$4,844 on the LME at 2:12pm yesterday in Singapore.
The metal used in pipes and wires has risen 3 percent this year, while zinc has surged 41 percent and nickel has advanced 21 percent.
Last month, Barclays PLC said supply might exceed demand every year through to 2020.
For Goldman, the main expansion in mine supply through to the first quarter of next year is expected to come from the Grasberg mine in Indonesia, Escondida in Chile and Sentinel in Zambia, according to the report.
Growth from Cerro Verde and Las Bambas in Peru might also contribute, it said.
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