Copper is one of the most common metal used in manufacturing, together with Crude, these 2 commodities are keenly watched as lead indicators for the economy down the road. A shortage of Copper is a good sign for the global economy, especially since mines are already maximizing their output. Clearly the shortage is not due to supply, but demand side.
Copper supply shortages will extend into the first half of next year as an accelerating Chinese economy more than doubles the pace of growth in global consumption even as mines extract a record amount of metal.
Demand will outpace supply by 316,000 metric tons in the first six months, more than all copper in London Metal Exchange warehouses, before a surplus emerges in the second half, Barclays Plc estimates. Production has lagged behind consumption since 2010, according to the International Copper Study Group. The metal may average $8,300 a ton in the second quarter, 6.7 percent more than now and the most in a year, according to the median of 21 analyst and trader estimates compiled by Bloomberg.
China, which uses 41 percent of the world’s copper, is rebounding from seven quarters of slowing growth after the government approved a $161 billion subways-to-roads construction plan in September. It’s being joined by central banks from the U.S. to Europe to Japan, who also pledged more stimulus. Housing starts in the U.S., the second-largest consumer, reached a four- year high last month and business confidence unexpectedly strengthened in Germany, Europe’s biggest economy.
“U.S. growth will be moderate and Europe is stabilizing, so that drag might reverse partially, and then it all falls back to China,” said Dominic Schnider, Singapore-based global head of non-traditional assets at UBS AG’s wealth-management unit. “Economic activity doesn’t have to be that strong in China for inventories to get drawn down and you could see a rally in the first half, but then you come into the second half where mine supply comes in on the strong side.”
Global demand will expand 3.4 percent to 20.85 million tons next year, from a 1.5 percent gain in 2012, Barclays estimates. Supply will climb 3.5 percent to an all-time high of 20.83 million tons. While that means an annual shortage of 19,000 tons, it’s driven by the projected first-half deficit, compared with a surplus of 297,000 tons in the second six months.
China’s copper demand may rise 5.5 percent to 8.1 million tons, from a gain of 4.8 percent this year, according to Beijing Antaike Information Development Co., which has researched metals for two decades. The infrastructure plans approved in September include about 2,000 kilometers (1,250 miles) of roads, subway projects in 18 cities and extra spending on railways.
The nation’s economy will rebound this quarter from the slowest pace in three years, and keep accelerating through at least the middle of 2013, according to the medians of as many as 37 economist estimates compiled by Bloomberg. That may not be enough to offset contractions elsewhere.
Via – Bloomberg
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