The worldwide glut of copper supply is poised to almost triple in 2014, driving prices to the lowest in at least three years at a time when the International Monetary Fund says economic growth will be weaker than forecast.
The surplus will reach a 13-year high of 272,000 metric tons, according to data from Barclays Plc and the International Copper Study Group in Lisbon. Codelco and Freeport-McMoRan Copper & Gold Inc., the biggest producers, are among those scheduled to add supply next year. The metal will drop as low as $6,450 a ton in 2014, or 10% less than last week’s close, the median of 22 analyst estimates compiled by Bloomberg shows.
New mines or expansions to existing pits from Mongolia to Indonesia to Chile will boost output as producers respond to prices that more than tripled in the past decade. Shortages occurred in seven of the past 10 years as the Chinese economy expanded almost sixfold. Mining companies are finally catching up just as growth in China, the world’s second-largest economy and consumer of two in every five tons, is projected to be the lowest in almost a quarter century.
“We’ve got enough of a surplus to keep prices under pressure,” said Robin Bhar, an analyst at Societe Generale SA in London who has covered metals for about 25 years. “You’re going to have to see demand really surprise, which I don’t see given the economic environment, to knock those expectations seriously off course.”
Copper fell 8.7% to $7,243.25 on the London Metal Exchange this year, tumbling into a bear market in April. The LMEX index of six industrial metals dropped 9.3% because of surpluses in aluminum and nickel. The Standard & Poor’s GSCI gauge of 24 commodities declined 1.7%, the MSCI All- Country World Index of equities gained 14% and the Bloomberg U.S. Treasury Bond Index lost 2.6%.
Production will jump 5.1% this year and 4.9% in 2014, twice the pace in 2012, according to London-based Barclays. Growth in demand will slow to 4.1%, from 4.8% in 2013, expanding the surplus from 94,000 tons. Stockpiles in warehouses monitored by bourses in London, New York and Shanghai reached 934,654 tons in June, the most since 2003, according to data compiled by Bloomberg.
Barclays’s prediction for a bigger copper surplus in 2014 contrasts with its forecasts for smaller gluts in aluminum, nickel and zinc. Lead shortages will worsen and the deficit in tin will be little changed, the bank says.