ICSG predicts copper surplus

The International Copper Study Group (ICSG), Lisbon, Portugal, has released its copper market forecast for 2021/2022, which predicts that world copper mine production, adjusted for historical disruption factors, will increase by roughly 3.5 percent this year and by 3.7 percent in 2022 after three years of remaining practically unchanged. As far as refined copper production, the ICSG forecasts that it will rise by roughly 3 percent in 2021 and in 2022. This follows a 1.6 percent increase in 2020.

The ICSG says mined production last year remained flat as production recovered in some countries, such as Chile and Indonesia, from constrained output in 2019 and additional output from projects in Panama, Russia and the Democratic Republic of Congo helped balance the negative impact the COVID-19 pandemic had on copper mine output in few countries, notably Peru.

After four years that saw only two major copper mines commissioned, the ICSG says the pipeline of copper mine projects is improving, with a number of major projects scheduled for startup in 2021/2022. As a result, the ICSG forecasts output will increase by 3.5 percent this year.

In 2022, additional output from the ramp-up of mines that opened in previous years and the start-up of new major projects and expansions combined with an improvement in the global pandemic situation should sustain additional growth of approximately 3.7 percent, the organization says.

World refined copper production grew by 1.6 percent in 2020 and is expected to rise by roughly 3 percent in 2021 as well as in 2022, ICSG says. In 2021-2022, the overall recovery from the pandemic and the continued expansion of capacity in China and the Democratic Republic of Congo will support this growth. While Chinese refined production was reduced by COVID-19 restrictions, tight scrap supply and reduced availability of concentrates early in 2020, growth of about 4 percent is expected for 2021 and 2022, the ICSG says.

World secondary refined production declined by 4 percent in 2019 and 2020, affected by the Chinese scrap import ban and the pandemic’s effect on the supply of copper scrap. However, world secondary refined production is expected to grow in 2021 and 2022 based on continued improvement in scrap availability, ICSG says.

The organization also forecasts that world primary electrolytic refined production will increase by 2.9 percent in 2021 and 2022.

Regarding apparent refined copper use in 2021, the ICSG says it is expected to remain essentially unchanged, though growth of about 3 percent is predicted for 2022. World ex-China refined copper use is estimated to have declined by about 9 percent last year. However, because of a 38 percent (1.2 million metric ton) rise in net refined copper imports, China’s apparent usage increased by 13 percent, which more than offset declines in other regions of the world. Therefore, overall world apparent refined usage was 2.5 percent higher than in 2019, the ICSG notes.

The organization expects Chinese refined copper imports to be lower this year than 2020’s all-time record. This will have a negative effect on Chinese apparent refined usage growth, resulting in a decline of about 4.5 percent, ICSG predicts. This will limit the growth of global refined copper use to about 0.2 percent compared with the 7 percent that is expected this year for refined copper use in the world ex-China.

The continued recovery of the world economy and copper end-use sectors and the expected improvement in the global pandemic will help drive growth of about 3 percent globally in 2022, according to the ICSG forecast.

Sustained growth in copper demand is predicted, the ICSG says, given planned infrastructure development in China and India and the global trend toward cleaner energy and electric vehicles.

World refined copper balance projections indicate a surplus of about 80,000 metric tons for 2021 and 110,000 metric tons for 2022, ICSG says. After a significant deficit in 2020 of about 600,000 metric tons arising from a significant increase in Chinese apparent refined copper use, ICSG  says it predicts smaller market surpluses in 2021 and 2022.

Not all analysts believe the red metal will be in a surplus situation, however.

According to a Reuters article published on www.nasdaq.com, analysts at Commerzbank say, "This assessment of the ICSG contrasts sharply with those of many other market participants, who envisage another seriously undersupplied copper market this year."

In the meantime, the three-month London Metal Exchange (LME) copper price was at $9,939.50 per metric ton Tuesday, May 4, Nasdaq.com reports. The metal reached $10,008 per ton Thursday, April 29, a high last seen in February 2011.

Copper stocks in LME-approved warehouses have reached a five-week low of 137,000 metric tons, losing 20 percent from the middle of April, Reuters reports.