http://www.ft.com/intl/markets/commodities
Copper is set for a period of price volatility as the market digests new supply but long-term prospects remain bright due to grade declines and extended lead times for new projects, according to global miner Rio Tinto.
Sentiment toward the red metal, used extensively in construction and electrical applications, has turned increasingly bearish over the past year as new projects have come on stream and concerns about slowing growth in China have intensified.
China accounts for about 40 per cent of global consumption of the commodity. These factors have pushed the benchmark copper price down 9.2 per cent this year to $6,691 a tonne.
However, some traders believe the price will recover. They say rising supply may not lead to a surplus in the refined copper market next year because of a raw material bottleneck.
Jean-Sébastien Jacques, head of copper at Rio Tinto, one of the world’s biggest mining companies, said a “wave” of new supply was set hit the market between now and 2016 as investments made over the past decade stared to bear fruit.
This would have a “negative” impact on the market, he said in an interview with the Financial Times, during London Metals Exchange Week, the biggest annual gathering of the industry.
“The bottom line is we expect volatility in the market place in the coming two or three years,” said Mr Jacques.
At the start of the year, analyst expectations were for a modest refined surplus in 2014 but the copper market is now close to balance and there is a fierce debate about the size of the likely surplus in 2015.
Antofagasta, the UK-listed copper miner, for example is forecasting a surplus of 400,000 tonnes next year and 300,000 tonnes in 2016.
But copper bulls say the surplus could be lower because of a shortage of scrap and a build-up of the wrong sort of concentrates at smelters. Refined copper is a 22m-tonne-a-year market.
A significant amount of the new supply coming on to the market is complex concentrates from mines in Chile and Peru that contain high levels of byproduct impurities, such as arsenic.
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