Weak China Copper Demand Drives Surplus
". . .copper prices more than doubled over the past year"
The supply number is more than double the 365,000-ton surplus estimated last month by the International Copper Study Group (ICSG)óthe main provider of regular data on global copper supply and demand.
The GFMS report is the latest effort to bring more transparency to the copper marketóan opaque sector made more difficult by uncertainty over stockpiles in China, the world's biggest consumer.
Although GFMS did not make concrete predictions for 2010 and beyond, it did say that the price outlook for copper remained bullish in the long termódespite last year's surplusódue to limited supplies, strong demand from China and India and recovering demand from developed countries.
"The key question here is whether the momentum provided by investment demand will be maintained to a time when an improvement in supply-demand can take over the reins," Neil Buxton, the managing director of Base Metals at GFMS said.
"Developments so far this year suggest that the answer is yes," he added,
The report, which was released during the CRU/CESCO copper week in Santiago, added that copper prices more than doubled over the past year, despite the "lackluster" supply-demand fundamentals.
It attributed the current disconnect between rising prices and slack demand for copper to speculative investments in futures contracts for the metal by funds on the medium-term expectation that supply would remain limited and demand would return robustly to create a deficit in late 2010.
But GFMS added that the price of copper would likely be volatile in the near term until global demand outside of China recovered sufficiently to reflect the current price levels, which were ahead of market fundamentals.