Copper Shortage to Be Worst Since 2004

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"Demand will likely exceed supply by 635,000 tons in 2011."

Copper demand will outstrip supply for the next two years as the economy recovers, China sustains consumption and mine output drops, Japan's top producer said.

Demand will likely exceed supply by 635,000 metric tons in 2011, the biggest deficit since 2004, compared with 234,000 tons last year, Hidenori Kamoo, general manager of the marketing department at Pan Pacific Copper Co., said in an interview Jan. 18. The shortage may be 91,000 tons in 2012, he said.

Copper, used in wires and pipes, climbed to a record $9,781 a ton yesterday after gaining 30% in 2010 as the world economy recovered from its worst recession since World War II. Goldman Sachs Group Inc. says the price may climb 12% in the next year to $11,000 a ton. Michael Jansen, metals strategist at JPMorgan Securities Ltd., predicts a deficit of 500,000 tons to 600,000 tons this year.

"The market will see a wider deficit because of steady demand growth in emerging markets, including China and Brazil, a gradual economic recovery in the U.S. and Europe and tight mine supplies," Kamoo said. This year's deficit would be the most since 2004, according to company data.

While there is likely to be a shortage, growth of copper consumption in China, the biggest user, may almost halve this year as the government curbs monetary expansion, cooling demand, Jansen said Jan. 15. Macquarie expects a shortfall of 550,000 tons, while the International Copper Study Group expects a shortage of 435,000 tons.

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