Global copper supply is expected to remain in surplus in 2014 and continue to exert downward pressure on prices, Australia's Bureau of Resources and Energy Economics forecast in its March quarter report.
"Although consumption is forecast to increase, continued expansion in China's copper refining capacity should more than offset the mandated closures of older refineries and result in higher world refined copper production," BREE said in the report.
Copper prices have become increasingly influenced by macroeconomic factors in recent years due to the practice of Chinese companies using copper stocks as collateral to secure finance agreements, BREE said. However, finance sector reforms and exchange rates in China are likely to reduce this practice and result in weaker investment demand for copper, it added.
Copper prices will also be impacted by increasing market pessimism over China's economic growth and a forecast rebound in the US dollar, BREE said.
Global copper prices averaged $7,326/mt in 2013 on the London Metal Exchange, and have fallen 13% since the start of 2014 to be trading around $6,500/mt in mid-March, BREE said.
The bureau forecast global copper prices in 2014 average $6,826/mt and in 2015 to average a lower $6,643/mt due to the continuing surplus.
From 2015, BREE forecast copper prices to rise an average 1.5%/year to around $6,906/mt to 2019.
BREE forecast global copper mine output to rise 4.6%/year from 2015 to around 24 million mt in 2019, driven by substantial production growth in Peru, Zambia and the Democratic Republic of the Congo.
In Zambia, copper production will grow at 10%/year to 1.5 million mt in 2019, with new production to come from First Quantum Minerals' Sentinel mine expanding to 300,000 mt/year and higher production from other existing mines, including Vedanta's Konkola mine expanding to 250,000 mt/year, BREE said.
In the DRC, higher production will come from Glencore-Xstrata's Kamoto mine expanding to 300,000 mt/year and its Mutanda mine expanding to 200,000 mt/year, it added.
BREE said Australia was expected to produce 985,000 mt of mined copper in the July 2013-June 2014 fiscal year and increase to 1.2 million mt by fiscal 2018-19 as new supply comes on stream from Rex Resources' Hillside and Oz Minerals' Carrapateena mines.
Refined copper production in Australia is forecast to rise 5.1% year on year to 477,000 mt in fiscal 2013-14 following the return to full production at BHP Billiton's Olympic Dam and Glencore Xstrata's Townsville refineries after production disruptions in fiscal 2012-13, BREE said.
