Copper on the brink of a long-term bear market,warns analysts

SPOKANE (Scrap Monster): The copper prices declined further, despite sharp rise in Chinese demand. Meantime, analysts from agencies including Barclays and Goldman Sachs see fair chances of the commodity prices entering a long-term bear market. Incidentally, copper prices have remained essentially flat when compared with the beginning of the year. The prices had registered a decline of over 25% in 2015.

The copper for delivery in September dropped to a one-month low of $2.14 per pound in New York on Tuesday. The decline in prices is despite the strong import figures posted by China- the key importer of the red metal. The Chinese customs data indicate that the country’s total imports of unwrought copper and copper products improved slightly over the year in July this year. The imports totaled 360,000 tons during the month. The refined copper imports during the initial seven-month period of the year are up by almost 20% at 3.1 million tons. The concentrate imports have surged higher by 36% year-on-year to 9.4 million tonnes during Jan-July ’16. The imports of copper concentrates during July this year were significantly higher by 43% at 1.38 million tonnes.

Meantime, analysts from Goldman Sachs and Barclays warned that copper is most likely to see further downside. However, Commerzbank shared a not-too-bearish view on the metal.

According to Goldman Sachs, the copper prices are likely to decline to $4,000 per mt over the next one year period, mainly on account of increased mine supply from across the world. This translates to 17% drop in prices over the next 12 months. The agency believes that the prices will progressively drop from current levels of $4,800 per mt to $4,500 per mt in three months. Further, the prices are likely to drop to $4,200 per mt in six months, finally settling at around $4,000 per my by end-July 2017. The key contributing countries for the rising mine supply will be Indonesia, Chile and Zambia.

Barclays expects the copper prices to trade at an average of $4,150 per ton through the second half of 2016. The metal had averaged around $4,692 per ton during H1 2016. The agency believes that yearly copper supply is likely to surpass demand through 2020. The predicted decline in copper prices is mainly attributed to rising supplies coupled with falling demand from China and other emerging economies.

On the other hand, Commerzbank retained its earlier price forecast of $5,200 per mt by the end of 2016. According to them, the seasonal drop in demand from China will be give way to surging demand after two months. The consensus forecast by 30 institutions sees copper averaging at $4,867 per mt during the last quarter of the current year.

It must be noted that the global copper market has recorded a deficit of 48,000 tonnes during January to May this year. The global mine production during the period from January to May this year totaled 8.14 million tonnes. The mine production has grown by 4.8% when matched with the corresponding five-month period in 2015. Meantime, global refined copper output jumped higher by 4.0% over the previous year to 9.66 million tonnes. The global copper demand during Jan-May ’16 stood at 9,706 kt, significantly higher when compared with 9,136 kt during the same period in 2015. The refined copper output during the month of May this year alone was 1,873.90 kt, whereas consumption during the month totaled 1,928.80 kt.