ISRI ROUNDTABLES: Copper Looks Strong

Strong demand from East and South Asia and a low ceiling on new supply sources should keep copper pricing above $1.00 per pound throughout much of next year. That was the opinion of analysts willing to make a forecast at the Copper Roundtable session of the ISRI Commodity Forum, held in Chicago in late September.

Several speakers noted the historic connection between supply deficits and copper pricing, including analyst Thomas Boustead of Refco LLC, New York. Predicting a supply deficit of more than 500,000 metric tons this year and another 250,000 metric tons next year, Boustead says this situation is causing consumers to work their way through inventories built up earlier this decade.

“Deficits don’t always have to imply high prices,” Boustead remarked, adding that, “These markets are forward looking,” and that the demand side of the equation has to be examined.

The biggest factor on the demand side is China, where even a slowdown in economic growth will not change the fact that the country has become a major consumer of copper scrap and finished copper.

Oil prices that remain above $45 per barrel could ultimately slow down many of the world’s economies, and in North America slower vehicle sales could affect copper consumption levels.

These are variables that could keep copper at the lower end of a $1.10 to $1.45 price range for copper that Boustead sees for the first quarter of 2005.

Bruce Blue of Freedom Metals, Louisville, Ky., remarked that the higher pricing is bringing more copper-based scrap into his nonferrous scrap processing facility. “The volumes have just skyrocketed,” he commented. “There’s nothing to it but the price. When the price goes high enough, everybody unloads. Copper is easy to purchase and easy to sell right now,” he stated, adding that number one copper is moving quickly to domestic consumers and that “exporters are calling again” for number two copper.

Ian Holden of Noranda Inc., Toronto, reported that electronic scrap is yielding feedstock for his company’s smelters, including 15 percent of the copper the company needs. The scrap is needed because “significant new sources of [mined] copper are really a long way off,” he remarked.

Holden’s review of forecasts for copper pricing show predicted 2005 average prices ranging from 88 cents per pound on the low end up to $1.35 on the high end. The median average found in forecasts, he noted, was $1.17 per pound.