Foreign media news on October 15: The International Copper Study Group (ICSG) stated after the Lisbon meeting that the global copper market will experience a large oversupply in 2024, while supply and demand will be roughly balanced in 2023.
According to ICSG forecasts, global copper production will exceed consumption by 467,000 tons in 2024, much higher than the 297,000 tons excess supply predicted in April.
ICSG expects that the copper market will still be in shortage this year, but the supply shortage will be reduced from the 114,000 tons predicted in April to 27,000 tons, which is minimal compared to the global market of 26 million tons.
ICSG researchers emphasized that the above predictions are tentative. Due to unforeseen developments, several recent supply and demand forecasts have deviated from actual supply and demand.
ICSG in April expected copper demand outside China to grow 0.4% in 2022 and 1.6% in 2023. But six months later, this forecast has become even more pessimistic. ICSG said copper use outside China will fall 1.0% this year compared with last year due to lower refined copper use in the European Union and North America. On the contrary, China's demand is strong, and ICSG predicts that China's apparent copper consumption will increase by 4.3% year-on-year this year. “Apparent” is used here because the ICSG only uses reported data, such as changes in domestic production, net trade and visible inventories, to estimate Chinese demand. However, ICSG's assessment coincides with the consensus in the copper market that Chinese demand has unexpectedly grown this year. Copper's rise in demand in green transition industries such as power and electric vehicles has helped cushion the impact of a manufacturing downturn over the past six months.
China will continue to be the core driver of global copper demand as high interest rates in Europe and the United States adversely affect manufacturing activity, as the latest purchasing managers' index showed that Chinese factory production is picking up.
ICSG acknowledges that the global economic outlook is challenging, but remains optimistic about next year's prospects. The global copper consumption growth forecast in 2024 is slightly lowered from 2.8% to 2.7%. ICSG said that expected improvement in manufacturing activity, the ongoing energy transition and the development of new production capacity (semi-manufactured products) in various countries will support further growth in global refined copper consumption in 2024.
Copper production surges
Global refined copper production is expected to increase by 4.6% in 2024, exceeding the expected increase in consumption next year. In fact, the production growth trend has already begun. The ICSG has raised its forecast for refined copper production growth in 2023 to 3.8%, up from the 2.6% forecast in April.
As with demand, growth in copper production can be attributed to China as it continues to expand its smelting and refining capabilities. Operational restrictions and smelter shutdowns in Chile, Indonesia, Sweden and the United States will limit copper output outside China this year.
But China's smelters are aggressively ramping up production. In the first eight months of 2023, China's copper volume increased by 11.5% year-on-year.
Next year Indonesia, India and the United States will build new smelters and expand production capacity, which will bring more growth momentum.
ICSG expects copper production from recycled materials to increase this year and next as investments in new secondary smelters and refineries are made.
ICSG’s forecast of the scale of oversupply next year surprised the market. However, ICSG's assessment of the general balance between supply and demand this year is also unexpected. Most analysts expect a supply glut in both 2023 and 2024. It is worth noting that the latest monthly report released by ICSG shows that global copper production will be in excess of 215,000 tons in the first seven months of 2023.
If demand from Western countries remains weak at the end of this year, it is unclear how the excess production in the first half of this year will be digested to achieve the small supply and demand gap expected by ICSG for the full year. However, although the timing may still be controversial, the latest report from the International Copper Research Organization has led to a growing consensus that the copper market is entering a period of rapid production growth and uncertain demand in the world outside China. This caused copper prices to fall below $8,000 a ton in early October for the first time since May, closing at $7,952 on Friday. Everyone believes that copper has a bright future in the energy transition, but now the supply and demand situation urgently needs to be balanced, which has put pressure on the market.
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