Copper Market Surplus Forecasts Reduced Amid Tightening Supplies

Changing Supply Dynamics Boost Copper Prices

The copper market is witnessing a significant shift in its supply landscape, leading to reduced forecasts for market surpluses and positively impacting copper prices. Recent developments have prompted analysts to revise their surplus projections, creating a tailwind for the industrial metal's prices.

Anglo American's Reduced Production Guidance

A key factor influencing this change is Anglo American’s announcement of lowered production estimates. The London-listed miner has reduced its output forecast for the next year to 730,000-790,000 metric tons, marking a 20% decrease from its previous estimate. For 2025, production is expected to be between 690,000 to 750,000 tons, down by 18%. This adjustment follows the company’s decision to put one processing plant at the Los Bronces operation in Chile on care and maintenance and modify plans for its Quellaveco facility in Peru.

Impact on Market Surpluses and Analyst Views

Analyst Alice Fox from Macquarie expressed that Anglo’s new guidance significantly impacts market expectations. Macquarie now anticipates copper market surpluses of 100,000 and 287,000 tons for 2024 and 2025, respectively, a notable decrease from their earlier forecasts of 203,000 and 369,000 tons.

Vale's Production Estimates and Global Production

Vale, the Brazilian mining giant, also reported lower-than-expected production guidance for 2024, estimating copper production between 320,000 to 355,000 tons. This figure is marginally higher than this year's expected output of 325,000 tons. With these revised estimates, global copper production is projected to hover around 27 million tons for the next couple of years.

Disruptions at First Quantum's Cobre Mine

Adding to the supply concerns is the situation at First Quantum’s Cobre mine in Panama, which contributed 1% to the global mined copper supply last year. The mine’s future remains uncertain due to Panama's top court ruling against First Quantum's contract. Analyst Michael Widmer from Bank of America has excluded Cobre Panama from his supply estimates for next year, shifting his forecast from a slight surplus to a deficit.

Political Factors and Election Impact

Widmer suggests that a restart at Cobre Panama seems unlikely before the May 2024 general elections in Panama, anticipating potential negotiations with a new administration post-elections.