Chicago 04/04/2016 - The copper price will average $4,850 per tonne in 2016, pressured lower by another year of overcapacity and China's transition towards a consumption-based economy, Thomson Reuters-GFMS said.
In its Base Metals Review and Outlook report on Tuesday, the consultancy forecasts the copper market to remain in surplus to 2018 while demand is sluggish despite easing measures globally and China's GDP growth target of 6.5-percent.
There is a risk that demand could disappoint again this year, particularly given recent comment regards the lack of room to lower Chinese interest rates, it said - further Chinese easing has been a key factor in driving recent gains.
Prices tumbled to a seven-year low around $4,300 earlier this year but have since made a modest recovery despite few changes to its fundamental backdrop.
Global copper consumption shrank 1.9 percent in 2015 and is only expected to grow in the low single-digits this year, Thomson Reuters-GFMS said.
"We believe that the worst of the downturn will be behind us by late 2016," it said. "However, bearing in mind demand growth consistently below 3 percent compared with circa 4 percent as recently as 2014, the transition to a sustained deficit market will now extend beyond our three-year forecast horizon to around the turn of the decade."
Mine production is set to grow in the next few years while miners attempt to recover a percentage of their investments made in previous years, it added.
This will result in average growth of 2.1 percent over the next three years, with smelting capacity increasing towards the end of the calendar year.
The main concern is a slowing China, which will account for 46 percent of global consumption by 2018 although consumption growth is expected to slow to an annual rate of 3.2 percent.
"With production exceeding consumption throughout our forecast horizon, the copper market is expected to remain in a surplus, albeit at a declining rate with less than 60,000 tonnes by 2018," Thomson Reuters-GFMS said. "Total stocks, measured in terms of weeks' consumption, is estimated to reach 6.6 weeks' by the end of the forecast horizon."
(Edited by Mark Shaw)