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(Kitco News) - (Kitco News) - Copper production struggling through 2012, according to BNP Paribas’ latest market comment released Friday.
“We continue to believe the copper mining industry will struggle to keep up with even the modest demand growth forecast for 2012,” said Stephen Briggs, senior metals strategist at BNP Paribas. “Indeed, although there is still scope, on paper at least, for strong production growth in the coming years, we have again cut our estimate of output in 2011 and especially our forecast for 2012.”
Briggs believes that mine production will rise by 4 to 4.5% in 2012 based on new mines coming into production as well as expansions at key operations. However, production will still be hampered by low ore grades and the possibility of labor disputes.
Supply and demand is also seen as remaining in deficit in 2012.
“We now expect copper to remain in deficit in 2012, which could leave the market very tight,” said Briggs. “It is of course possible that demand will fall short of our forecast, but on our production projections, copper would stay on a tightening trend right down to demand growth of just 2%.”
They do however see a small surplus in 2013.
Briggs’ overall sentiment regarding the copper market this upcoming year has two outcomes; if the world economy deteriorates, prices will rise while if the economy holds, copper producers will struggle to meet demand in 2012.
“We think the latter outcome is the more likely,” Briggs said. “Copper may continue to struggle in early 2012, but it could then move back up towards USD 9,000 per metric ton.
Downward pressure from late 2012 as a period of surplus finally looms should be cushioned by a pick-up in demand growth.”
