Copper price outlook downgraded even amid rising consumption

Chile's Copper Market Health Commission, Cochilco, has announced new copper price projections and estimated metal demand and supply in 2016 and 2017. Cochilco lowered its 2016 copper price forecast to $ 2.15 per pound. The new forecast is significantly lower compared to an early $ 2.53 a pound price forecast released in October last year. The Commission cut its forecast amid weakening commodity markets. This price can cause a reduction in production. Meanwhile, the copper price is forecast to rebound slightly to $ 2.20 a pound during 2017.

According to market participants, any changes in the Chinese economy will have a direct impact on the export of commodities. Copper as a commodity has gone through a super boom cycle for several years, supported by double-digit GDP growth in China. The fall in copper prices is attributed to a slowdown in the growth of the Chinese economy. Cochilco's price forecast is based on 3 percent growth in copper demand from China in 2016, 1.5 percent in the US and 6.5 percent in India. However, global demand for refined copper is expected to grow by 2.3 percent in 2016 and 2.6 percent in 2017.

The increase in global copper production in 2016 will be 4.6 percent and is expected to be 2.2 percent in 2017. The increase in production in 2016 is due to the expansion of capacity and the implementation of new projects in Peru. Given this scenario, the refined copper market will remain in surplus of approximately 200,000 tonnes in 2016 and 170,000 tonnes in 2017.

Meanwhile, Chilean authorities have urged mine owners to put in place strict cost control mechanisms in mines that would help them survive during difficult times. Recovery is expected to take place only at the end of 2016. Copper production in the country is estimated to grow marginally, by 0.1 percent, compared with the previous year, to 5.76 million tonnes in 2016.