The red metal think tank International Copper Study Group (ICSG) has forecast a 4% uptick in global refined output for the year 2020 to 280,000 metric tons. This was reported at a meeting earlier this week in Lisbon, Portugal on 22-23 October 2019. Key drivers of this increase will be a rise in production to absorb the rising demand in the United States (US) weighed in part by Japan production sluggishness. The projected deficit for 2019 is estimated at about 320,000 metric tons.
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, strength of the global economy especially the Chinese. In this context it can be noted that actual market balance outcomes have on recent occasions deviated from ICSG market balance forecasts due to unforeseen developments.
China and Africa to drive production
A rise of around 4% is expected in world refined production in 2020 based on capacity expansion in China, improvements in Africa (DRC and Zambia) and a return to full capacity of numerous smelters/refineries affected by operational issues this year. The 4% growth expected for 2020 is higher than that put forward by the ICSG in April. This is mainly due to the fact that planned electrolytic refined production is not expected to be limited by tightness in the availability of concentrates as much as previously anticipated.
Smelter shut downs and technical upgrades weighed 2019 production
In 2019, global refined copper production growth has been significantly constrained by an unusually high number of smelter disruptions and temporary shutdowns for technical upgrades/modernizations. This has resulted in significant declines in planned output in Chile, the DRC and Zambia as well as reductions in the EU, Japan, India and the United States. The reductions in the DRC have been at SX-EW mines and therefore have had a direct negative impact on refined production (electrowinning).
Refined output in 2021 will expand 2%
In 2021, growth may be above 2% but will depend on currently committed projects starting on schedule.World refined production is expected to increase by about 0.5% in 2019 and around 4% in 2020 respectively.
Surplus could weigh pricing
With the red metal trading for $5,550 – $5,850 a metric tone weighed by the weak global outlook, a surplus in 2020 could bring copper prices under pressure. Copper has had a tough 2019 as it continues to be impacted by the autopsy effects of the 3 top global risks namely US -China trade war, Brexit uncertainty and geopolitical tension that have waned global aggregate demand.
The Red Metal Analyst