Chicago 20/09/2016 - Copper should average around $4,520 per tonne in 2017 amid steady Chinese demand and a lack of supply curtailments capping potential upside, Edward Meir, analyst at INTL FCStone, said at the Institute of Scrap Recycling Industries (ISRI) roundtable here.
This time last year, analysts and traders predicted gloom and doom for the industry as the Chinese growth engine finally collapsed. But the world's largest end-user of copper unexpectedly stabilised and the real estate market – particularly in second and third tier cities – rebounded.
"The big surprise for the year was that fact that China didn't really fall apart, as many people were thinking, including myself," Meir said during his presentation. "China has been a remarkable growth story and is single-handily influencing prices."
The People's Bank of China (PBoC) effort to keep things afloat also aided the commodities complex with domestic credit growing more in 2016 than in 2009 when the Great Recession hit.
With GDP growth within the government's target of 6.5-7 percent, the Chinese economy is staying on the rails as it transitions away from metal-intensive infrastructure projects to a westernized method of relying on the private sector.
"Copper demand in China is okay, not great, but all this stimulus is helping certainly on the construction side," Meir said.
CUTS? WHAT CUTS?
But copper prices haven recovered as quickly as zinc, nickel or tin because the miners are making money right now and will continue to do so unless prices dip below $4,000 per tonne.
Chile – the world's largest producer of copper – has only seen production drop five percent year-over-year despite low prices and a host of natural disasters that have led to mine disruptions.
But the big story is the Peruvian expansion into the copper arena, with the country producing fifty percent more copper in 2016 compared to the previous year.
"Supply is still very comfortable will likely give us more of the same trading range into next year...moving higher towards the end of 2017 as some of these metals start to correct themselves and supply comes off the market," Meir said while projecting that market ends with a 150,000 to 300,000 tonne surplus.
(Editing by Tom Jennemann)