Copper prices may turn south in 2007
By Tom Stundza -- Purchasing, 9/13/2006 1:03:00 PM
Various banks and brokerages have completed their periodic reviews of metal price forecasts and have pushed up the world copper consensus average to $3.05/lb, up from about $2.60 at midyear. This compares with just under $1.70/lb in 2005. However, looking ahead, the consensus forecast for 2007 has become cloudy at an average $2.60. "There is absolutely a fundamental case for higher prices this year," says commodities analyst Andrew Harrington at Australia & New Zealand Banking Group in Melbourne. He writes clients: “We've got a situation where the supply balance is very tight and by some reckoning we're heading into the end of year pool with production falling below consumption." Jon Bergtheil at the J.P. Morgan Securities base metals research department in London writes that he has increased the outlook for 2006 pricing for a market basket of nonferrous and precious metals, but sees a price fall ahead in 2007. Those bullish on copper believe that the market has been underestimating the combined impact of the production losses at the massive Escondida mine in Chile (during the recent 25-day strike) and other copper mines run by Grupo Mexico) with the robust to-date buying by China, the U.S., and parts of Europe. Even the International Copper Study Group, has been discussing “underlying tightness in refined supply.” Veteran copper trader Dr. Mo Ahmadzadeh, president of Mitsui Bussan Commodities (USA) in New York, agrees that “the copper market can’t afford an interruption (since) world supply is very finely balanced this year.” (Hear Dr. Mo’s views on a video interview on The Street.com)
But next year may be another story. While supply may be tight this year, it’s bound to loosen in coming months from new capacity coming on stream, Bergtheil writes, “supporting our thesis that current price levels are unrealistically high and unsustainable.” Meanwhile, Sydney-based Westpac Banking also believes that spot copper prices are due for a fall in 2007 as U.S. housing weakness will stifle demand and a lack of labor strife will keep supply line full.
Copper prices will be lower in 2006
10/16/2005Copper prices end a five-day run in London
04/16/2009Buyers press for on-time deliveries
10/17/2007
Now Playing: 
