HSBC raises 2013 copper price outlook on tighter market


Published — Wednesday 30 January 2013

Last update 30 January 2013 12:26 am

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LONDON: HSBC has raised its 2013 copper price forecast, saying it expects positive sentiment to drive prices for the metal in a structurally balanced market.
The bank lifted its 2013 forecast for the average cash copper price to $ 8,000 per ton from $ 7,500 to reflect the metal’s relatively good start to the year.
“Copper, perennially described as fundamentally tight, actually finished 2012 posting a gain in inventories,” analyst Andrew Keen said in a note to clients.
“This market remains balanced in our view, and this is enough to keep prices high when sentiment is good.”
Benchmark three month copper futures on the London Metal Exchange (LME) were at $ 8,066 a ton at around 1000 GMT yesterday.
HSBC raised its aluminum price forecast by about 5 percent to $ 2,250 per ton, but maintained its view that prices would remain around this level due to a continued structural surplus.
“It would not take a revolution in the rate of global demand growth to fix the structural surplus in aluminum,” analyst Keen said.
Keen expects aluminum to be in a 5.9 million tons surplus over the 2012-2016 period, with the excess absorbed by a compound annual growth rate (CAGR) of 6.2 percent for global demand, and the market could be brought back into balance in one good year of demand.
Three months aluminum on the LME was at $ 2,056 a ton yesterday.
The bank also raised its iron ore price forecasts for this year to $ 123 per ton from $ 105 earlier, saying that the market was probably driven by seasonal restocking by Chinese mills and short-term concerns over supply.
The bank said, however, that it believes the lack of marginal cost support will see weakness for iron ore later in 2013.
Chile’s state copper commission, Cochilco, earlier said Chile is seen producing 5.596
million tons of copper this year, up 3 percent from 2012 levels, as heavy investment in mines in the world’s No. 1 producer pays off.
Cochilco said a pick-up at state copper producer Codelco’s century-old Chuquicamata deposit and the launch of its Ministro Hales mine at the end of the year will help lift
output of the metal, which is used in construction and power generation and transmission.
But analysts have warned that several factors — deteriorating ore grades, delays to key energy and mining projects, and operational woes — threaten forecast production jumps.
Cochilco expects output in Chile, which mines roughly a third of the world’s copper, will rise to 5.754 million tons in 2014 from an estimated at 5.433 million tons last year,
which was an 3.2 percent increase from the year before.
“This is fairly positive news because international estimates said Chile couldn’t reach predicted output and Chile’s production rose 3.2 percent,” Mining Minister Hernan de Solminihac said.

Cochilco had estimated 2012 copper output at 5.45 million tons in November, and de Solminihac had said in April that production would reach a whopping 5.7 million tons. Many analysts at the time had called his forecast too ambitious.
If Chile meets its production forecast, the higher copper supply could “slightly weigh on prices,” said George Gero, precious metals strategist at RBC Capital Markets Global
The Andean country will attract $ 100 billion in mining investment in the next 10 to 12 years, a slightly longer time frame than previously forecast, as regulatory uncertainty and energy woes loom as key risks, the Sonami mining association said earlier this month.
Industry experts say Chile is failing to take a firm hand in regulating its mining and energy industries, leaving billions of dollars worth of projects exposed to the risk of lawsuits by local communities.
The forecast for climbing output from Chile comes as some global miners are scaling back investment plans as operating costs soar and the world’s economic outlook remains volatile.
But many miners in the Andean country have major plans to revamp aging mines.
World No. 1 copper miner Codelco has an ambitious investment plan worth roughly $ 27 billion to maintain and ultimately lift production at its copper mines to more than 2 million tons.
In addition, BHP Billiton and Rio Tinto have approved plans for a $ 4.5 billion expansion of Escondida, already the world’s biggest copper mine.
The world’s third-biggest copper mine, Collahuasi, hopes to have a good year and turn the corner to produce more than it did in 2012, its CEO told Reuters recently.
Anglo American’s major growth project, Los Bronces, helped increase the company’s copper production in 2012, a relative bright spot for the global miner.
Cochilco sees copper prices averaging $ 3.57 per pound this year, unchanged from its previous estimate, before dropping to around $ 3.32 per pound in 2014.
Globally, it sees copper output growing 3.3 percent this year, outpacing demand growth, which is seen up 1.5 percent. It expects a 56,000 ton copper surplus in the market in 2013.

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