JKL58
10-13-2008, 05:57 PM
By: Reuters
Published on 13th October 2008
LONDON - Copper prices are expected to trade at much lower levels next year as demand for base metals crumbles and zinc prices are unlikely to recover until 2010 at the earliest, a London Metal Exchange seminar heard on Monday.
"We expect the copper market to move into a surplus in 2009 as a result of weaker demand growth and this would also include China," analyst Robin Bhar at Calyon said.
Unlike many other metals such as zinc which are trading below their marginal production costs, copper was still well above the high end of its marginal cost curve at around $3 000 per tonne to $3 500, Bhar said.
On Monday, three-months copper was trading at around $4 955 per tonne, after falling around 20 percent over the past week over deepening concerns of a global slowdown in demand.
Copper prices were seen supported above $3 000 due to persistent constraints in both copper concentrates and scrap.
Copper prices have fallen, down by around 45 percent since a record of $8 940 per tonne in July, on prospects of weaker demand growth, rising stocks in LME warehouses and the market moving into a surplus in the fourth quarter this year, he said.
Calyon forecast cash copper would trade at an average of $6 305 a tonne in 2009 and in 2010 prices were seen at $5 800.
In zinc, the short and long term fundamentals were very different, said analyst Gayle Berry at Barclays Capital.
"In the short term, the market surplus is rising, stocks are rising and the demand outlook looks pretty gloomy -- but further forward there is actually quite a lot to be bullish about."
A number of mines are due to close in 2010 and 2011 and there is also a number of smaller mines that are going to reach lower ore grades, Berry said.
DEFICIT
"A concentrate deficit is looming in 2010," she said.
Barclays Capital forecast cash zinc would trade at an average of $1 966 per tonne in 2008, falling to $1 725 in 2009.
The global financial crisis, triggered by slump in the U.S. property market last year, has exacerbated recent price falls for many metals with zinc down almost 40 percent this year.
A U.S. bailout plan, set out to rescue the banking system, would not resolve the slowdown in demand in the short term, but it would be important in the longer term, Bhar said.
"I am hopeful that the measures that have been taken and will be taken in the next few days will start to unfreeze the banking system," he said. "The turning point could be brought forward so that we have recovery perhaps starting in 2010, rather than being postponed to much later." In the longer term, there was evidence that copper prices could stay more strongly elevated than in the past, especially if demand from top consumer China would stay firm.
Copper prices rose five-fold in five years before peaking in July this year.
"China is clearly not going to go away," Bhar said, adding that the expansion of the BRIC (Brazil, Russia, India and China) economies would underpin prices longer term.
"We think the strong upward path from the end of 2004 can continue because of structural issues to do with demand and constraints to supply," Bhar said.
"But currently the clearly cyclical weakness in 2009 and possibly in 2010 is going to be the story that people will believe in more than "stronger for longer"," he added.
Published on 13th October 2008
LONDON - Copper prices are expected to trade at much lower levels next year as demand for base metals crumbles and zinc prices are unlikely to recover until 2010 at the earliest, a London Metal Exchange seminar heard on Monday.
"We expect the copper market to move into a surplus in 2009 as a result of weaker demand growth and this would also include China," analyst Robin Bhar at Calyon said.
Unlike many other metals such as zinc which are trading below their marginal production costs, copper was still well above the high end of its marginal cost curve at around $3 000 per tonne to $3 500, Bhar said.
On Monday, three-months copper was trading at around $4 955 per tonne, after falling around 20 percent over the past week over deepening concerns of a global slowdown in demand.
Copper prices were seen supported above $3 000 due to persistent constraints in both copper concentrates and scrap.
Copper prices have fallen, down by around 45 percent since a record of $8 940 per tonne in July, on prospects of weaker demand growth, rising stocks in LME warehouses and the market moving into a surplus in the fourth quarter this year, he said.
Calyon forecast cash copper would trade at an average of $6 305 a tonne in 2009 and in 2010 prices were seen at $5 800.
In zinc, the short and long term fundamentals were very different, said analyst Gayle Berry at Barclays Capital.
"In the short term, the market surplus is rising, stocks are rising and the demand outlook looks pretty gloomy -- but further forward there is actually quite a lot to be bullish about."
A number of mines are due to close in 2010 and 2011 and there is also a number of smaller mines that are going to reach lower ore grades, Berry said.
DEFICIT
"A concentrate deficit is looming in 2010," she said.
Barclays Capital forecast cash zinc would trade at an average of $1 966 per tonne in 2008, falling to $1 725 in 2009.
The global financial crisis, triggered by slump in the U.S. property market last year, has exacerbated recent price falls for many metals with zinc down almost 40 percent this year.
A U.S. bailout plan, set out to rescue the banking system, would not resolve the slowdown in demand in the short term, but it would be important in the longer term, Bhar said.
"I am hopeful that the measures that have been taken and will be taken in the next few days will start to unfreeze the banking system," he said. "The turning point could be brought forward so that we have recovery perhaps starting in 2010, rather than being postponed to much later." In the longer term, there was evidence that copper prices could stay more strongly elevated than in the past, especially if demand from top consumer China would stay firm.
Copper prices rose five-fold in five years before peaking in July this year.
"China is clearly not going to go away," Bhar said, adding that the expansion of the BRIC (Brazil, Russia, India and China) economies would underpin prices longer term.
"We think the strong upward path from the end of 2004 can continue because of structural issues to do with demand and constraints to supply," Bhar said.
"But currently the clearly cyclical weakness in 2009 and possibly in 2010 is going to be the story that people will believe in more than "stronger for longer"," he added.