Chile, the world's largest copper producer, on Sept. 14th down its forecast for average copper prices this and next year, warned of a possible glut in the market, anticipating a slowdown in major economies and a gradual withdrawal of economic stimulus measures. However, a number of investment institutions are opposed.
Cochilco, the Chilean government's copper commission, said in its quarterly report Sept. 14 that it lowered its copper price forecast for this year to $4.20 a pound (about $9,259.3 a ton) from its previous forecast of an average of $4.30 a pound. Copper prices are expected to average $3.95 next year as the global market shifts from undersupplied to oversupplied, the report said.
Copper prices have since fallen back after surging to a record high in May as supply struggled to keep pace with demand from a recovering global economy. LME copper futures traded around $9,485 / ton in Asian trading on Sept. 15th.
Copper is often seen as an economic bellwether because of its widespread industrial use. Last week, the Federal Reserve released the Beige Book of economic growth pointed out that the US economy slowed in the third quarter; Traders also expect the Fed to start withdrawing stimulus this year. None of this is conducive to higher copper prices.
Global copper demand will grow 2.4 per cent this year and 3 per cent next year; Copper supply, meanwhile, is forecast to grow 1.2 per cent this year and 4.5 per cent next. As a result, the copper market is expected to shift from a shortage this year to a surplus next year.
However, some investors take a different view, global copper supply will continue to be lower than expected, weak supply growth will be positive for prices. They point out that electric vehicles and decarburization policies are driving a surge in demand for copper, which is keeping prices up.
The outlook for the global metals and mining sector has shifted from "positive" to "stable" and while most metals prices are above historical levels, this does not mean they will weaken significantly from current levels.
For now, global industrial activity remains strong, with manufacturing purchasing managers' indices above 60 in the US and Europe and around 50 in China. Copper prices are expected to remain strong compared with historical averages until at least the end of 2022, while structural deficits will keep prices high in the long run.