London — Demand curtailment amid the coronavirus pandemic is cancelling out a deficit that supported copper prices in early 2019, but the red metal could still be a winner longer-term on expected infrastructure spend, Nigel Robinson, CEO of base metals producer Central Asia Metals, said Wednesday.
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In an interview, Robinson said, "2019 started strong for copper, with a 300,000 mt deficit."
During the year, however, the US-China trade war led copper to underperform, hitting consumption growth and limiting the rise in copper prices to 3.5% to finish the year at $6,174/mt, according to Central Asian Metals.
Now, with a year-on-year contraction of as much as 10% foreseen by analysts at JP Morgan in global GDP in first half 2020 as a result of the pandemic, copper prices have slumped as demand has fallen back, although 14- to 21-day production cuts in locations, including Peru and South Africa, may lend some support, Robinson said.
The London Metal Exchange cash copper price shed around 15% last month, finishing March at $4,797/mt after touching three-year lows mid-month.
ING Economics said Wednesday that it had cut its second quarter copper forecast "significantly" to an average of $4,680/mt and expects gradual recovery mostly during the second half to see a full-year price average at $5,030/mt. This would still be well below the LME price of $6,188/mt of the start of this year.
"We won't see a significant change in copper prices but there should be significant stimulus in the second half," resulting in copper-intensive infrastructure growth and leading to recovery, Robinson said. With the expected increase in GDP in 2021, "copper could be a winner," with world copper consumption ex-China potentially recovering to its pre-coronavirus growth level of 1%-2% annually, he said.
"In the longer term beyond 2023 there should be a growing deficit of copper," Robinson said.