LONDON/BENGALURU- Copper prices are set to extend their retreat from record highs in the coming months, under pressure from rising mine supply and China’s drive to cap commodity prices, a Reuters poll found.
Benchmark copper soared to a record peak of $10,747.50 a ton in May, partly propelled by speculators betting that strong demand from electric vehicles and other green energy applications was powering a supercycle.
Since then, copper has pulled back on worries about a resurgence of the pandemic, the potential for central banks to taper stimulus and China’s sale of strategic reserves due to concerns about rising raw material prices.
The cash copper contract on the London Metal Exchange (LME) is expected to average $9,000 a ton in the fourth quarter, a median forecast of 23 analysts showed, down 8 percent from Tuesday’s closing price.
That forecast is still up 6 percent from the April poll.
“We expect the market to slump on abundant mine supply… from large brownfield and greenfield projects that are close to being commissioned or are already ramping up,” said Florent Pelé at Société Générale in Paris, who expects copper to average $8,500 in the final quarter.
The consensus forecast for the copper market balance is a deficit this year of 243,000 tons.
London copper prices advanced on Thursday, supported by a weaker dollar that makes greenback-priced metals cheaper and more appealing to holders of other currencies.
The dollar hovered around a two-week low, weighed down by the latest insistence from Federal Reserve Chairman Jerome Powell that rate increases aren’t on the radar.
Three-month copper on the London Metal Exchange rose 0.6 percent to $9,746 a ton, while the most-traded September copper contract on the Shanghai Futures Exchange fell 0.8 percent to 71,550 yuan ($11,044.73) a ton, tracking overnight losses in London.
Aluminum is the second best performing base metal on the LME, climbing 26 percent so far this year, and having touched three-year highs, boosted by strong demand and production cutbacks in China due to power issues.
Analysts, however, expect LME cash aluminum to average $2,315 a ton in the fourth quarter, down 7 percent from the current price.
“The biggest bear risk is a moderation in China’s demand, prompting a diversion of surplus to the export trade,” said Tom Price, head of commodities strategy at Liberum.
The market surplus forecast has been cut nearly in half to 390,000 tons compared to the April poll. – Reuters
