Higher Copper Output Expected In 2012, Imports Will Slow – Jones

 

 

"Against the moderate expectations for copper consumption we have to consider the likelihood of a strong rebound in copper output," said Glen Jones, executive director of Intierra Resource Intelligence. "This should be most evident at the mine level as lower pricing and the depletion of existing reserves will mean less of a contribution from scrap."

 

 

He spoke at the PDAC2012, the Prospectors & Developers Association of Canada's annual convention, which occurs from Sunday to Wednesday in Toronto.

 

 

Mine output is expected to gain 860,000 metric tons, or 5.3%, in 2012. Of that amount 745,000 metric tons is expected to be in concentrates. Jones believes that supply will outpace demand this year.

 

 

Economic turmoil is a leading factor in some nations struggling with supply in 2012.

 

 

"Consensus macroeconomic forecasts for 2012 have been downgraded slightly in the past two to three months," said Jones. "For 2012, an absolute decline is anticipated in Western Europe by one and half percent while very modest increases are forecast for the United States and Japan."

 

 

Chinese output is also expected to slow, said Jones.

 

 

The Purchasing Managers Index, used to gauge manufacturing and economic health on point scale, shows that 2012 will not be a strong year. A 50 PMI rating is the minimum to show any increase.

 

 

"PMI figures also suggest a pretty bleak future with the euro zone in negative territory and China and Japan struggling to achieve much more than the break even 50 point level," said Jones.

 

 

Imports are also expected to slow as consumption growth in China has decreased, weighing negatively on markets. Jones expects imports for 2012 to total 2.6 million metric tons.

 

 

While China remains the major player in copper, 2012 will be a tough year.

 

 

"We see 2012 as year of relatively modest imports," said Jones. "Consumption growth in China, probably about 5.7 percent, though high in absolute terms, will be low in the Chinese context.

 

 

"Credit is not yet easy as had been hoped and compared to 2009, there's much less scope for increased investment in public projects, especially given the local government depth."

 

 

Jones does not anticipate any major re-stocking this year.

 

 

"Stock build is likely to be very small or negative," said Jones. "Prices would have to fall much further for large scale purchasing of copper for China's strategic reserves.

 

 

"And also the excess stock built up in November and December will need to worked out."