Brand new copper price forecasts for 2012, 2013 and 2014

Two factors hold the key to the future of copper prices: mine supply and growth in China. Here are where analysts see copper prices in 2012-2014.

There’s good news and bad news for copper investors in the recent study released by the International Copper Study Group (ICSG). According to their copper forecasts, global demand will exceed supply by 240,000 tonnes in 2012. That should help copper prices in 2012, but the ICSG expects a copper production surplus of 350,000 tonnes in 2013.

The ICSG is careful to point out that the surplus of 350,000 tonnes is “relatively small” and “could vary from those projected.” But their numbers align with what other organizations expect.

A report from UBS shows global copper mine production grew less than 1 percent a year between 2009 and 2011. That was temporary, though, as production numbers are poised to surge to 8.5 percent a year through 2014 (per the Wall Street Journal).

“If China cannot absorb the copper flowing into it, then the outlook for copper is negative,” UBS said in the report.

Growth in China is key as the country consumes 40 percent of the world’s copper supplies. It makes sense then that copper investors grew nervous after disappointing growth numbers out of China during Q1. Still, there were signs in April that growth’s accelerating behind the Great Wall. China’s purchasing managers’ index (PMI) rose to a 13-month high of 53.3 in April (per Reuters).

“If we start to see China coming back more strongly in the second half, which is something that we expect, then we could see, you know, stocks starting to come down to really critically low levels and we could see prices sort of bouncing up,” Peter Ghilchik, multi-commodity manager with CRU in London, said recently (per Minyanville). In his words, that could push copper prices toward $10,000 per tonne by the second quarter of 2013 – a record level that we haven’t seen since early 2011.

Other copper price forecasts:

  • Copper will trade in a range between $8,300 and $8,800 per tonne in 2012 according to the Thomson Reuters GFMS Copper Survey (per Reuters).
  • CRU believes copper prices will average $3.85/pound for the year with a peak late in 2012 around $8,650 per tonne.

Our favorite copper price prediction comes from Citi Investment Research – a daring group of analysts who are willing to project prices far off in the future. They see copper hitting $3.80 in 2013, then falling to $3.61 per pound in 2014 (per the Wall Street Journal).

In the near-term, look for copper prices to get a temporary boost off news that copper inventories monitored by the LME have fallen to their lowest levels since 2008 at 241,550 tons (per Reuters).

Altogether in 2012, copper prices have risen about 10 percent. Let’s hope the red metal can keep that trend intact – at least until miners start flooding the market with new supply in 2013.


CME Group takes ax to silver margin requirements, again

Less volatility means less risk, so the CME’s letting investors ratchet up the risk in their trading accounts.

At the close of business on April 16, 2012, the CME Group will lower margin requirements for the second time since February. COMEX 500 silver futures will drop by 12.5 percent to $18,900 per contract from $21,600, and the maintenance margin will be lowered to $14,000 from $16,000 per contract.

Less volatility means less risk, so the CME’s letting investors ratchet up the risk in their trading accounts. And yet, margins may still have room to fall.

“The margins are still relatively high compared to a year ago,” Nick Trevethan, senior commodity strategist at ANZ in Singapore, told MineWeb last week. “If we see volatility continue to decrease, there may be more scope for margin cuts.”

Last year, the CME controversially raised margins five times by a total of 84 percent – and they did it over the course of a few weeks between late April and early May. That helps push silver prices down 30 percent. Now, they’re trying to lure investors back into the silver market.

They’re doing it in the palladium and copper markets as well. Copper investors, in particular, are getting a big break. The CME announced that they’re cutting rates for the red metal by 20 percent to $5,400 per contract, and the new maintenance margin will be $4,000.


‘Undervalued’ African Metals (AFMCF, AFR) soon to net $20 million/year

The President and CEO of African Metals Corp, Nigel Ferguson, offers up thoughts on the future of his company, the Luisha South project, the future of the U.S. economy and why African Metals is an appealing stock for investors.

African Metals Corp. (PINK:AFMCF) is one of 500 companies that we profiled in our new book (the Top 500 Gold and Silver Mining Stocks). We recently had the honor of doing an exclusive email interview with Nigel Ferguson, the President and CEO of African Metals Corp. Here’s what he had to say. If you had a few sentences to tell people why they should invest in African Metals Corp., what would you say?

Nigel Ferguson: AFR is under-priced and under valued at present. It will have a solid cash flow base; be very well positioned to expand operations both in the DRC, Zambia and other areas. We will be looking at any project within the base metals arena that is likely to add value through production profits. It’s a company with a solid base after 4 years of work being completed and is ready to expand and take advantage of its very good position in the country. Do you have any updates on the Luisha South project?

Nigel Ferguson: We are awaiting delivery of the final critical supplies and consumables into DRC so as to allow the DMS plant to be switched on and start processing ore. Ore is being stockpiled on the ROMM pad to allow blending of the grade and allow a consistent ROM feed.

The water recirculation ponds are being finalized with one pond completed as at 17th March and the tailings or slimes dam completed on the 18th March.

The DMS concentrator plant is rated at 100tph and we will ramp up production from a single 8 hour per day shift, to a 24 hour per day operation over the next 2 to 3 months or less.

Overview projected cash flow for the first 5 years is below. We are aiming to have about $20m net profit per year for about 12 years. Capital expenditure in Year 1 is to purchase floatation cells for the treatment of sulphide material from the pit which will be in operation from month 9 onwards.

Please click the image below for a larger version of African Metals Corporation’s projected cash flow for the next five years. Where do you see the company headed over the next three to five years?

Nigel Ferguson: On the back of a cash flow base, we will be expanding our operations in the DRC and neighboring countries. It should have at least $50m in the bank and two or three more projects on board within 18 to 24 months. Where do you see the price of gold going in the next year and the next three to five years?

Nigel Ferguson: We are not a gold company and this is not relevant to us. If its copper and cobalt prices. I don’t see the demand for copper weakening over the next 5 years with a projected price range of between $7500 to $8500 per tonne. The developing world is still developing and average demand will remain strong.

Cobalt is still in demand for battery manufacture and until new technology for stored power is found and accepted worldwide there will remain a good demand for Cobalt. Do you think hyperinflation is a genuine threat to the U.S. economy?

Nigel Ferguson: Yes I do. The US economy is in tatters, artificially held up by the US government bailouts and the printing of money. The critical underlying economic principles are not being worked on and Debt to GDP has blown out beyond any structured recovery can be achieve in a sensible period of time. Is there anything you think people don’t realize about African Metals?

Nigel Ferguson: We may be at the small end of the market, but with a proven track record in the DRC and production about to commence on the Luisha Project after only 22 months since its acquisition, we are well positioned to take advantage of many other assets on offer in the area. These are being offered to us on a near daily basis. We have a very pragmatic approach to exploration and development of profitable operations.

There is also a continuing trend of “fear of the unknown” with the DRC, which has had bad press over the last few decades. I can assure you that the Katanga Province is not without its troubles, BUT nowhere near the troubles portrayed in the international press and on the whole it is a peaceful place to do business compared to other African countries I have worked in.

African Metals trades under the following tickers: PINK:AFMCF, CVE:AFR and FRA:OWW.


Top 5 copper price forecasts for 2012

Get an idea of how much growth analysts expect to see in China and around the world in 2012 by taking a look at their copper price predictions. Here are five of our favorites.

Early in December 2011, copper prices started rising, and they’ve shown little sign of slowing that climb since the start of the year. Over the past two months copper prices have risen 11 percent from 3.40 a pound to more than 3.80 a pound.

Since copper is so integral to the expansion the global economy, economic growth means higher copper prices. The numbers are skewed toward China, though. Last year, the PRC alone accounted for 40 percent of global refined copper demand. We can get an idea of just how much growth analysts expect to see in China and around the world in 2012 by taking a look at their copper price predictions for the year. Here are five of them:

1) Average of $3.85 a pound. Cochilco, the Chilean government’s copper commission, raised their copper forecasts last week from $3.50 a pound to a 2012 average of $3.85 a pound. Cochilco cited increased demand out of China as the driver for the move.

2) Up to $9,000/mt. Standard Bank is predicting global copper consumption will rise at a relatively mild 1.2 percent in 2012. That means “demand for copper is unlikely to be strong enough to support prices above $9,000/mt for most of the year.” That’s roughly $4.08 per pound. “We think copper will average $7,700 with good support when we go below $7,000,” Walter de Wet, head of commodities at Standard Bank, told ResourceInvestor.

3) Copper north of $9,000 a tonne. In contrast to predictions from Standard Bank, Barclays Capital analysts predict copper prices will trade “consistently above $9,000 a tonne by the second half of the year” (per ResourceInvestor).

4) $7,350/ton. Early in January 2012, Deutsche Bank AG reduced their 2012 forecast for copper by 18.8% to $7,350/ton. “We expect that near-term deflationary fears from the worsening economic picture in Europe and intensifying hard landing fears in China may continue to depress pricing for the base metals complex,” the bank said at the time.

5) $10,000-a-ton. Strong copper price performance at the start of 2012 had some investors speculating that the red metal could hit $10,000 a ton by the end of the year. “Six months from now the market may be genuinely tight, but it is definitely not genuinely tight today and so I would treat calls of $10,000 a ton with a pinch of salt,” BNP Paribas strategist Stephen Briggs told the Wall Street Journal.

Photo by cobrasoft.