ICSG Raises 2019 Copper Deficit Prediction

According to the latest copper forecast from the International Copper Study Group (ICSG), China is set to remain the world’s top contributor to world refined production growth to the end of 2020.

In its copper forecast for 2019 and 2020, the ICSG says it expects world mine production to remain generally unchanged this year from 2018’s 2.5 percent increase; growth in 2020 is set for 1.9 percent.

This year’s forecast factors in additional output from the start up of First Quantum Minerals’ (TSX:FM,OTC Pink:FQVLF) Cobre Panama project, the expansion of Southern Copper’s (NYSE:SCCO) Toquepala mine and some small- to medium-sized mines going into commissioning.

However, the ICSG expects that growth to be balanced by regulatory and taxation issues set to impact Zambian output and a “significant” decline in Indonesian output. The numbers for 2020 are based on extra supply from mines and expansions set to begin this year, along with a boost in Indonesian output.

As for global refined production, the ICSG indicates growth of 2.8 percent this year and 1.2 percent in 2020. The study group attributes 2020’s subdued growth to expected tightness in concentrate availability.

While production will see a small hit this year from planned maintenance shutdowns in China and Europe and smelter operational issues in Chile and Zambia, expanded electrolytic capacity in China and the ramp up of electrowinning output in the Democratic Republic of Congo will offset these factors.

The ICSG also notes that world secondary production from scrap is expected to recover over this year and next following a small decline in 2018.

World apparent refined usage is also set to increase by 2 percent this year and 1.5 percent in 2020, with the study group citing copper’s essentialness to economic activity, infrastructure development in major countries and the clean energy movement.

On the flipside, however, the growth of world refined copper usage is expected to see an “adverse impact” from a slowdown in world economic growth this year and next.

The study group also touches on a hot button issue within the copper space as of late: the potential supply deficit. According to the ICSG, projections indicate a deficit in world refined copper of approximately 190,000 metric tonnes this year and 250,000 metric tonnes in 2020; 2019’s deficit had been previously docketed at 65,000 metric tonnes in the group’s October 2018 meeting.

However, the study group also acknowledges that “unforeseen developments” could shift actual outcomes away from its predicted numbers.

“ICSG recognizes that global market balances can vary from those projected owing to numerous factors that could alter projections for both production and usage, namely the current US-China trade issues (and the) strength of the global economy, especially the Chinese,” the report reads.

As of May 10, copper was trading at US$6,135 per tonne on the London Metal Exchange.

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Securities Disclosure: I, Olivia Da Silva, hold no direct investment interest in any company mentioned in this article.