Copper supply shortages will extend into the first half of next year as an accelerating Chinese economy more than doubles the pace of growth in global consumption even as mines extract a record amount of metal.
Demand will outpace supply by 316,000 metric tons in the first six months, more than all copper in London Metal Exchange warehouses, before a surplus emerges in the second half, Barclays Plc estimates. Production has lagged behind consumption since 2010, according to the International Copper Study Group. The metal may average $8,300 a ton in the second quarter, 4.8 percent more than now and the most in a year, according to the median of 21 analyst and trader estimates compiled by Bloomberg.
China, which uses 41 percent of the world’s copper, is rebounding from seven quarters of slowing growth after the government approved a $161 billion subways-to-roads construction plan in September. It’s being joined by central banks from the U.S. to Europe to Japan, who also pledged more stimulus. Housing starts in the U.S., the second-largest consumer, reached a four- year high last month and business confidence unexpectedly strengthened in Germany, Europe’s biggest economy.
“U.S. growth will be moderate and Europe is stabilizing, so that drag might reverse partially, and then it all falls back to China,” said Dominic Schnider, Singapore-based global head of non-traditional assets at UBS AG’s wealth-management unit. “Economic activity doesn’t have to be that strong in China for inventories to get drawn down and you could see a rally in the first half, but then you come into the second half where mine supply comes in on the strong side.”
Copper rose 4.3 percent to $7,929 a ton this year on the LME, the world’s largest metals bourse, as the LMEX gauge of six industrial metals gained 1.6 percent. The Standard & Poor’s GSCI gauge of 24 commodities added 0.8 percent and the MSCI All- Country World Index of equities jumped 11 percent. Treasuries returned 2.7 percent, a Bank of America Corp. index shows.
The metal averaged $7,949.55 since the start of January, headed for the second-highest level in a quarter century after last year’s record $8,825.98. Freeport-McMoRan Copper & Gold Inc., the biggest publicly traded producer, may report a 44 percent gain in net income next year, according to the mean of 11 analyst estimates compiled by Bloomberg. Shares of the Phoenix-based company will advance 28 percent in the next 12 months, the average of 21 predictions shows.