The Chilean government has lifted its forecast for copper prices this year and next, citing continued strong demand from China, the world's largest consumer of the metal.
The Chilean Copper Commission predicted Wednesday that copper prices will average $2.77/lb this year, up from $2.64/lb forecast three months earlier, and $2.95/lb in 2018, up from $2.68/lb in a previous report.
Cochilco head Sergio Hernandez attributed the increase to stronger-than-expected growth in China, where an expansive fiscal and monetary policy, an infrastructure program and the housing market are driving copper demand. Strong Chinese demand is expected to push prices higher even as the market slips from a slight deficit into surplus next year as production outpaces demand.
However, the figures are below highs above $3.20/lb reached by copper prices on the London Metal Exchange in recent days.
Global mine production is forecast to rise 4.3% next year to almost 21 million mt after falling 0.8% this year, thanks to higher production in Chile, Peru, China and Kazakhstan, among others.
Meanwhile, demand is forecast to rise 1.4% to 24 million mt, following a similar rise this year, reflecting stronger demand in China, the US and India.
However, the government official warned that imbalances in the Chinese economy meant that such growth was not sustainable in the medium term, noting that the Congress of the Chinese Communist Party taking place this week in Beijing could shed light on the outlook for commodity prices over the coming years.
Last month, Chile's Central Bank forecast copper prices would average $2.75/lb this year and next before falling to $2.70/lb in 2019, while the government budget for 2018, presented to Congress earlier this month, forecast a copper price of $2.77/lb.
