SINGAPORE/LONDON, May 24 (Reuters) – A series of copper mine shutdowns and supply logjams has prompted some analysts to scale down forecasts for a market surplus, but it would take more disruptions to swing the market into a deficit.
“People are making adjustments, we certainly are. At the beginning of the year we were pencilling in a 300,000 tonne surplus. That’s probably going to be pegged back by half or so,” analyst Robin Bhar at Societe Generale in London said.
“Demand is down as well, so one offsets the other. I don’t think we’ll have a deficit market again but certainly a more balanced market.”
The forecast surplus has weighed on benchmark copper prices , which have shed 13 percent since touching a peak in February of $8,346 a tonne for the year so far.
The global market for refined copper was expected to have a 98,500 tonne surplus this year and 305,000 tonnes in 2014, based on the average forecast of 18 analysts polled by Reuters in April. The 2013 estimate was already scaled back from a 127,000 tonne surplus forecast in January.
Those April forecasts came shortly after a rockslide at Rio Tinto’s Bingham Canyon copper mine, which the company said would reduce production by about 100,000 tonnes.
But they were made before the world’s second-biggest copper mine, Grasberg in Indonesia, shut this month after a tunnel collapse killed 28 workers. Owner Freeport McMoRan Copper & Gold has said it will not reopen the mine until it is certain conditions are safe.
On top of mining issues, plants in China, the world’s top producer of refined metal, have been cutting back capacity due to a shortfall in the scrap metal they use as a feedstock, while India’s top two smelters have been shut due to pollution concerns.
Because copper production often falls short of forecasts due to mining accidents, labour disputes, ore degradation or power shortfalls, analysts typically factor in a production disruption level of between 800,000 to 1 million tonnes, around 4 to 5 percent of the 21 million tonne market, Leon Westgate at Standard Bank in London said.
“I think people cut that (disruption rate estimate) significantly this year in expectation the industry would get its act together,” he said.
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