The short-term outlook for the copper market "is expected to continue to be volatile as national stimulus programs, macro-economic events and movements in the dollar continue to dominate the financial markets and affect the price of copper," UK-listed Chilean miner Antofagasta said Tuesday.
The market is also affected by the weak scrap supply, where refining charges for smelters are lower than concentrate TC/RCs with new supply coming from Peru and elsewhere, the company said in its half-year financial statement.
"There have been few cuts in mine production so far this year reflecting the industry's continued success in reducing costs and the strengthening of the copper price," Antofagasta said.
"If prices weaken towards $2.00/lb or below with conviction then supply cuts can be expected, but in the meantime supply surpluses are forecast until at least 2018 as demand growth is forecast to remain modest," the company added.
The London Metal Exchange cash settlement price for copper was $4,746/mt ($2.15/lb) on Monday, and has averaged $4,729/mt for 2016 to date.
The outlook beyond 2018 looks stronger when the market is expected to go into deficit, Antofagasta said.
Mining group BHP Billiton took a similar view Tuesday, saying in its results statement for 2015-16 fiscal year (July-June) that "copper prices continue to be affected by growing supply on the back of improving levels of productivity and slightly weaker rates of demand growth." In the short to medium term, "new and expanded production should keep the market well supplied, notwithstanding announced cuts to higher-cost production," BHP said.
In the longer term, "the copper outlook remains positive as demand is supported by China's shift towards consumption in addition to the scope for substantial growth in other emerging markets," it added.
A deficit is expected to emerge "as grade decline and limited high-quality development opportunities constrain the industry's ability to cheaply meet growing demand," BHP said.
Antofagasta's copper production for the full year 2016 is expected to be at the lower end of the 710,000-740,000 mt guidance issued in January, the company said Tuesday.
BHP Billiton produced 1.58 million mt of copper in 2015-16, and expects this to rise by 5% to 1.66 million mt in 2016-17.
