Analysts slashed their copper price forecasts for this year and next to levels below the 2012 average as the metal came under increased pressure from a weak outlook for demand and a surge in new supply, a Reuters poll showed. The 31 market participants surveyed in the three weeks to April 22 expected cash copper prices to average $7,900 a tonne in 2013, down 0.7 percent from a 2012 average of $7,958.30 and lower still compared with a forecast of $8,119 in a January poll.
Next year, prices for the metal used in power and construction are expected to fall to $7,672.10 a tonne, below earlier forecasts for 2014 prices of $7,775 a tonne. Demand remains uncertain due partly to high physical stocks and a slowdown in economic growth in China, which accounts for as much as 40 percent of global demand for refined copper.
"We have been gloomy on the prognosis for Chinese demand for metals in 2013. Key to this is that the recovery in the wider economy is likely to be more subdued than some had hoped ... and because the level of inventories are high in China," Ross Strachan, an economist at Capital Economics, said. "We expect total stocks to continue to rise as demand disappoints and production continues to rise," he said. China's economy unexpectedly stumbled in the first three months of 2013 as the annual rate of growth eased to 7.7 percent from the 7.9 percent pace set in the final quarter of last year, and fell short of a Reuters poll forecast for 8.0 percent.
The data prompted a sharp sell-off in commodity markets last week, with copper prices reaching a 1-1/2 year low below $7,000 a tonne. Benchmark copper on the London Metal Exchange (LME) traded at a session low of $6,762.25 a tonne on Tuesday. Stocks in bonded warehouses in Shanghai hit a record high around 1 million tonnes in late January, although they have since fallen to a seven-month low at 600,000-700,000 tonnes.
This followed a rise in the spread between prices on China's domestic market over prices on the LME, fuelling hopes that Chinese importers would resume fresh orders soon, traders said last week. In LME-registered warehouses, however, copper stocks were at their highest levels in more than 9-1/2 years. "To some extent, the rise in LME warehouse stocks has been a reflection of destocking from unrecorded inventories in China over the last two to three months," said Nic Brown, head of commodity research at Natixis. "If LME prices remain low or push further down, we would expect this destocking to switch to opportunistic restocking, much as has happened over the last two to three years, taking metal out of LME warehouses into China."
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