The copper price rebounded on Friday, moving back into positive territory for 2016 after a disappointing economic number in the US sent the dollar reeling.
In morning New York trade July copper, the most active contract, jumped more than 3.2% exchanging hands for $2.1355 a pound ($4,705 a tonne) following US non-farm payrolls data showed the weakest job gain in the world’s largest economy in nearly six years.
That hurt the US dollar which fell against major currencies, making commodities cheaper in importing countries like China. The copper price has been under pressure recently after a reading of Chinese manufacturing activity showed that Beijing’s economic stimulus program is beginning to run out of steam. Fears of devaluation in the renminbi compounded the pressure on the copper price as China is responsible for 46% of total global copper demand of some 22 million tonnes.
More than 750,000 tonnes of annualized supply was idled in 2015 in response to low prices
Another factor that pushed copper to three month lows earlier this week is robust supply.
More than 750,000 tonnes of annualized supply was idled in 2015 by companies including Freeport McMoRan and Glencore in response to low prices, according to a report by consultants Wood Mackenzie, but producers are looking far more resilient in 2016 and curtailments this year are unlikely to exceed 150,000 tonnes. In addition some major projects are ramping up this year including China Minmetals’ Las Bambas mine and Freeport’s Cerro Verde expansion project in Peru.
A recent research report by FocusEconomics compiling views on the copper market of global analysts were fairly sanguine about the outlook for the metal.
According to the report which covers analysis by 22 investment banks and research houses including the likes of Deutsche Bank, JP Morgan, Macquarie, Oxford Economics and others, the copper price is set to rise steadily (albeit modestly) towards the end of the year and throughout 2017.
Analysts forecast that prices will average $4,972 per tonne ($2.25/pound) in the final quarter of 2016. They expect prices to increase further and average $5,373 per tonne ($2.44/pound) in Q4 of 2017. Of the 22 surveyed 15 kept forecasts for the rest of the year steady, 5 upped price targets and two lowered.
There is some divergence in the forecasts with Standard Chartered predicting copper at $6,000 ($2.72) by the end of the year. That compares to Barclays Capital which has a particularly dim view of the prospects for the red metal at $4,180 ($1.90) which is around the six-year low futures hit in January this year.
