By Andy Home
LONDON- The global copper market is facing another year of supply deficit, according to the International Copper Study Group (ICSG).
The Group’s April forecast is for a supply shortfall of 114,000 tons this year after a 431,000-tonne deficit in 2022.
When the ICSG statistical committee last met in October, it expected a shift to surplus this year to the tune of 155,000 tons. That market turnaround is now only seen materializing next year.
The calculated difference between small deficit and small surplus is a marginal one in the context of a 26-million-tonne global market but the change of view captures two key strands in the current copper narrative.
Usage, particularly in China, appears to be growing faster than previously forecast, while mine supply is yet again failing to live up to expectations.
The ICSG’s expectations for another year of copper shortfall are in part due to “better expectations for Chinese usage as compared to the Group’s previous forecast,” it said in its April 28 update.
China’s “apparent usage” of refined copper is now forecast to grow by 1.2 percent this year and by 2.6 percent in 2024.
The calculation could easily be thrown off, since it is based on changes in visible inventory combined with China’s net imports of refined metal.
Net imports were surprisingly robust last year at 3.6 million tons, up 8.7 percent on 2021 and the second highest annual total after 2020, when a record 4.5 million tons were imported.
Last year’s elevated net imports served to inflate China’s apparent usage. A 16.4 percent slump in net imports over the first quarter of this year will do the reverse.
However, the ICSG notes that “underlying real Chinese demand growth estimated by consultants varies between 2.5 percent to 2.9 percent for both” 2023 and 2024.
Usage growth in the rest of the world, meanwhile, is expected to accelerate from last year’s weak 0.4 percent pace to 1.6 percent this year, surpassing pre-COVID levels, according to the ICSG.
These look optimistic forecasts, given palpable weakness in China’s giant manufacturing sector, recessionary fears in Europe and a banking crisis in the United States.
But the ICSG contends that despite the “challenging” macro-economic backdrop, “manufacturing activity is expected to continue rising in most of the key copper end-use sectors”.
The global race to electrify is boosting copper usage in electric vehicles and the grid infrastructure needed to support them, subtly changing Doctor Copper’s traditional price relationship with the global industrial cycle.
At the time of the ICSG’s last meeting in October, it was expecting global mine production to surge by 3.9 percent in 2022 and by 5.3 percent this year.
It now thinks growth was actually 3.0 percent last year and has slashed its forecast to 3.0 percent again this year.
Only two major copper mines were brought on stream between 2017 and 2021 but four big supply additions have been ramping up simultaneously.
