Copper prices face pressure next year due to a growing global surplus, as tepid demand from top consumer China fails to soak up surging supply from new and existing mines, a Reuters poll showed. The average forecast for 2015 cash copper prices from 25 market participants was $6,724.03 a tonne, down 0.5 percent from a similar forecast in July.
For 2014, analysts expect prices to average $6,887.60 a tonne, down 0.2 percent from a previous forecast and almost 6 percent lower compared with average prices in 2013. The outlook for copper prices has worsened due to expectations of an increasing market surplus. Analysts predict this year's surplus will be in the region of 94,300 tonnes, before ballooning to 350,000 tonnes in 2015.
"We see a looser market in the second half of the year as we expect a lower level of Chinese imports and mine supply will be growing strongly," said Caroline Bain, senior commodities economist at Capital Economics. Mining company Glencore in August posted a 13 percent increase in first-half copper output. Adding to the view of more supplies entering the market is a resumption of raw material exports from major exporter Indonesia after a months long hiatus.
Doubts also remain about the outlook for copper demand from China, which accounts for as much as 40 percent of global copper consumption, given a slowdown in the country's property sector - a major consumer of the metal used in power and construction, and tightening credit conditions. "Chinese demand conditions should improve on a seasonal basis in Q4 although the property sector will continue to be a drag for some metals...as we head into 2015," Nicholas Snowdon, a metals analyst at Standard Chartered, said.
Chinese and foreign banks have tightened credit conditions in the copper trade in China since June, when an alleged scam came to light at Qingdao port involving metal being used multiple times as collateral for loans. In contrast to copper, the aluminium market is expected to tighten significantly next year to show a 102,500 tonne deficit, from an earlier prediction of a 4,444 tonne deficit.
In 2014, it is estimated to register a surplus of 38,500 tonnes, compared with a previous forecast of 235,500 tonnes. Low aluminium prices have prompted cutbacks from some producers, and aluminium stocks have been falling steadily since March to touch a three-year low. Aluminium is seen at $1,871 a tonne in 2014, up 2.4 percent from previous forecasts, according to 26 analysts, and 1.4 percent higher than 2013 prices. In 2015, prices are set to rise to $2,000 a tonne, up 2 percent from previous estimates.
Nickel is seen ending the year 17 percent higher at $17,478 a tonne, but still 2.4 percent lower than a previous estimate. In 2015, prices are expected to rebound to $20,177.50. Nickel prices, which rose to 27-month highs in May, have come under pressure as anticipated shortages following an ore export ban in Indonesia failed to emerge as the Philippines filled the gap in ore supply by much more than expected.
Zinc is expected to be a big gainer for the year, with the metal seen rising 14 percent in 2014 to $2,180 and rising further to $2,350 in 2015, lifted by a deficit of 201,000 tonnes this year and 168,500 tonnes in the following year. Tin prices are expected to average at $22,347.30 a tonne in 2014, 3.5 percent lower than previous forecasts. Although it is expected to rebound to $22,850 a tonne in 2015, that figure is still 6.2 percent lower than previous forecasts, as concerns remain about the outlook for demand. Lead is expected to average at $2,133 per tonne this year, down 1.2 percent from previous estimates and almost flat compared with 2013, before rebounding to $2,288 in 2015.
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