London 31/10/2016 - The copper market has lacked excitement this year compared with other base metals and bulk commodities, Max Layton, head of European commodities research at Goldman Sachs, said.
This underperformance is expected to continue, he added at the LME seminar here on Monday October 31.
"Copper has pretty much done nothing this year - it has spectacularly underperformed compared to other base metals and coal," Layton said
The three-month copper price on the LME is currently around $4,845 per tonne, having seen little significant movement since the start of the year. Goldman Sachs has a three-to-six month copper price forecast of $4,300 per tonne and a 12-month estimate of $4,200 per tonne, Layton added.
This is against a backdrop of the copper market being in a surplus of some 300,000 tonnes this year; as well, this will increase in 2017 because refined production will grow by some 3% in 2017 while demand growth will be 2.5-3%.
"The 20 largest copper producers look like they are going to increase production considerably - by 200,000 to 300,000 tonnes," Layton added.
Additionally, the copper market has not had a similar level of money-market manager positioning this year as the other metals - it has moved from a level of $0.5 million short to $1.0 million long in a sector where money-manager positions currently amount to $16 billion against virtually zero at the start of the year.
Much will depend on Chinese demand remaining strong, he added. In the area of asset investment in China, trends are changing; it grew 45% year-on-year in 2011 but this is flat now - a pattern that is unlikely to alter much in the next few years.
"For copper, 2018/2020 is likely to be the bottom of the [price] cycle," Layton said.
(Editing by Mark Shaw)