Copper shortage seen extending as China accelerates

Global Shortfall

Global demand will expand 3.4 percent to 20.85 million tons next year, from a 1.5 percent gain in 2012, Barclays estimates. Supply will climb 3.5 percent to an all-time high of 20.83 million tons. While that means an annual shortage of 19,000 tons, it’s driven by the projected first-half deficit, compared with a surplus of 297,000 tons in the second six months.

China’s copper demand may rise 5.5 percent to 8.1 million tons, from a gain of 4.8 percent this year, according to Beijing Antaike Information Development Co., which has researched metals for two decades. The infrastructure plans approved in September include about 2,000 kilometers (1,250 miles) of roads, subway projects in 18 cities and extra spending on railways.

The nation’s economy will rebound this quarter from the slowest pace in three years, and keep accelerating through at least the middle of 2013, according to the medians of as many as 37 economist estimates compiled by Bloomberg. That may not be enough to offset contractions elsewhere.

European Recession

The 17-nation euro-area tumbled back into recession last quarter and economists surveyed by Bloomberg expect Japan to do the same this quarter. Europe accounts for 18 percent of copper demand and Japan 5 percent. U.S. leaders have yet to resolve the so-called fiscal cliff of automatic taxes rises and spending cuts, which the Congressional Budget Office has warned risks shrinking the economy. The International Monetary Fund cut its forecast for global growth in 2013 twice since July.

Hedge funds and other speculators are betting on lower prices, U.S. Commodity Futures Trading Commission data show. They held a net-short 2,649 futures and options in the week to Nov. 20, after turning negative the week before for the first time since August.

While stockpiles monitored by the LME fell 33 percent to 249,975 tons this year, those in bonded warehouses in China reached a record 700,000 tons, Goldman Sachs Group Inc. said in a Nov. 8 report. Those tracked by the Shanghai Futures Exchange, which are separate from the bonded-warehouse figure, have more than doubled to 205,933 tons, bourse data show.

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