Refined copper market to be in significant surplus in 2022

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The copper market is expected to be well supplied in 2022 after a deficit in 2021, Platts reported on Tuesday (Dec. 7).

The global refined copper market saw a deficit of 479,000 mt in 2020, according to the International Copper Study Group (ICSG) while the Lisbon-based group expects a small deficit of 42,000 mt in 2021. Next year’s supply forecast will exceed demand by a colossal 328,000 mt, ICSG said.

Next year’s surplus is based on the assumption of a 3.9% increase in refined output, the biggest increase in eight years, with copper demand expected to see a 2.4% increase, ED&F Man Capital Markets analyst Edward Meir said in a note also on Tuesday.

Preliminary data indicates that world copper mine production increased by 3.3% over the first eight months of 2021, with concentrate production increasing by around 5% and solvent extraction-electrowinning (SX-EW) declining by about 4%, ICSG said in its November 2021 Copper Bulletin.

During the period under review, production in Chile, the world’s biggest copper mine producing country, fell 1.5% with a 1% growth in concentrate production being more than offset by an 8% decline in SX-EW output mainly at the Escondida mine.

However, output in Peru, the world’s second biggest copper mine producing country, increased by 10% due to the fact that March-May 2021 production was up by 35% from a constrained March-May 2020 during which time the industry was severely impacted by a COVID-19 related country lockdown.

In Indonesia, output increased by about 57% principally as a consequence of the continued ramp-up of underground production at the Grasberg mine.

Strong increases were also seen in the D.R.Congo (+11%) and Panama (+85%) due to additional output from new or expanded operations. Production in the United Sates declined by 0.8%, ICSG said.

At the same time, world refined copper production increased by about 2.1% with primary production (electrolytic and electrowinning) up by 1.2% and secondary production (from scrap) up by 6.5%.

copper prices
(Source: International Copper Study Group)

Preliminary official Chinese refined production data indicates growth of 5.8% while Chilean total refined copper production (electrolytic and electrowinning) declined by 5% negatively impacted by an 8% reduction in electrowinning refined production. Refined production was up by 11% in the D.R. Congo due to the continued ramp-up of new or expanded SX-EW plants. Refined output increased by 11.5% in the United States mainly due to a recovery from 2020 operational issues.

Preliminary data also indicates falls in Brazil, Germany, Japan, Myanmar (SX-EW), Russia, Spain (SX-EW) and Sweden for various reasons including maintenance work, operational issues and the shutdown of SX-EW plants. Globally, secondary refined production (from scrap) increased by 6.5% with China being the biggest contributor to this growth, the Lisbon-based ICSG said.

With supply prospects looking optimistic, “many are calling for lower prices heading into 2022,” Meir said, with ED&F’s December copper price range between $9,315-$9,880/mt.

The average London Metal Exchange (LME) cash copper price for October was US$ 9,778.50 /t, up 4.9% from the September average of US$ 9,324.07 /t. The 2021 high and low copper prices through the end of September were US$ 10,724.50 /t (on 10th May) and US$ 7,755.50 /t (on 2nd Feb), respectively, and the year average was US$ 9,247.27/t (49.6% above the 2020 annual average).

Copper is often used as a gauge of global economic health and is used in power and construction.