Analysts revise copper market outlook for 2020 from deficit to surplus3 min read

On the back of the coronavirus outbreak, analysts revised the 2020 outlook on the global copper market, with some now expecting it to be in surplus rather than a previously anticipated deficit.

CRU Group copper analyst Vanessa Davidson projected that first-quarter copper demand will tumble 22% on a year-over-year basis given the impact of the outbreak. She called the decline “very significant” while speaking at the Prospectors & Developers Association convention in Toronto.

Similar to other forecasters, CRU Group revised its 2020 outlook from a modest deficit to a surplus in the copper market. “We were originally forecasting a small deficit of 53,000 tonnes,” Davidson said. “And our opinion now is it will see a surplus of around 200,000 tonnes.”

Davidson noted the deficit was fairly small in the context of the broader copper market but also said there remained “large downside risks” given how tough it is to predict the full impact of the coronavirus.

S&P Global Market Intelligence Research cut its 2020 global refined copper production forecast by 230,000 tonnes to 12.45 million tonnes with lower production in China given the impact of the coronavirus on output. Market Intelligence also decreased its demand estimate by 299,000 tonnes to 12.42 million tonnes of copper.

“We now forecast the copper market to be in a 27,000-tonne surplus in 2020, compared with the 41,000-tonne deficit we forecast in early January,” Market Intelligence analysts said in a recent report. “We have also lowered our forecast 2020 copper price to an average of US$5,997/t from US$6,211/t.”

The copper market revisions come as analysts assess the broader impact of the new coronavirus on the Chinese and global economy.

S&P Global Ratings recently slashed its outlook for China’s 2020 GDP growth from 5.7% to 5.0%. “The Chinese economy is expected to recover firmly by the third quarter, and 2021 GDP is projected to expand by 6.4%, up from the previous 5.6% forecast, as pent-up consumer demand returns to the market,” Market Intelligence analysts said.

Davidson noted that one scenario would see China begin to recover in the second quarter and into the second half of 2020. “Having said that, a 22% decline is fairly significant,” Davidson said of the copper market. “And there’s a lot to do to make up for that in the second half of the year.”

China has started to take economic measures aimed at boosting economic growth, with the government easing lending requirements, for example. Analysts have said they expect the Chinese government to continue with more stimulus, although what form it may take is not clear.

“There will definitely be more stimulus,” CRU Group analyst Paul Robinson said while noting that it remained an open question what the stimulus might target.

China could aim for more direct intervention through infrastructure funding such as upgrading grids, or it could look to take measures to unleash consumer spending, according to Robinson.

Robinson also stressed that there are significant uncertainties over the ultimate impact of the coronavirus outbreak. How the virus is contained in the coming three to four weeks and how consumers react in China to stimulus measures will be key factors in determining the economic impact, Robinson said.

China’s strong response in containing the virus slowed its global spread, Robert Friedland, Ivanhoe Mines Ltd.’s co-executive chairman, said during a keynote presentation at the mining conference in Toronto.

“They put speed bumps in the path of the virus through herculean effort,” Friedland said. “That’s giving you time to get prepared, to change your lifestyle.”

Ivanhoe Mines is developing the top-tier Kamoa-Kakula copper project and has turned to Chinese firms for funding, with Zijin Mining Group Co. Ltd. holding a 39.6% interest in the preproduction-stage development and a 13.8% interest in Ivanhoe itself.


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