LME Copper to struggle to sustain rallies much above $7,000 a ton in interim

In the interim, BNP Paribas believes that LME copper will struggle to sustain rallies much above $7,000 a ton and that the fundamentals are sufficiently weak to drag it back down to at least the March low and perhaps to $6,000 a ton.

BNP Paribas looks for a small copper-market surplus in 2014-2015 and doubts rallies above $7,000 per metric ton will be sustained. 

The bank says it looks for demand to grow above trend, with refined copper demand projected to increase by 5.5% to 6.0% in 2014 and by 4.0% to 4.5% in 2015. However, copper output is also rising sharply. 

BNP Paribas forecasts that world mine production will rise by about 10% over 2014-15, albeit with the growth skewed heavily towards 2015. 

The bank forecast a further modest global supply surplus of refined copper over 2014-15 of 450,000 metric tons, skewed toward 2015.

While the faltering in early June of copper’s recovery from the March low was largely due to the Qingdao scandal, BNP Paribas thinks there are structural reasons to expect it to remain more under downward than upward pressure. 

This may persist until mid-2015, when the market may start to look to the increasingly positive longer-term story.