Chile lowers copper price estimate for 2021 on lower demand, US stimulus

Chile's copper commission Cochilco has revised down its average copper price forecast for the year to US$4.20 per lb. from a previous estimate of US$4.30 per lb. on the back of slowing Chinese demand and expectations of an easing of stimulus measures in the United States.

Prices are expected to average US$3.95 per lb. next year as the market swings into surplus, according to Cochilco's latest copper market trends report.

After reaching record levels in May, the metal, used in construction and green energy-related infrastructure, has retreated and then bounced around in a tight range. Three-month copper rose on the London Metal Exchange (LME) on September 15 for the first time this week, climbing 0.7% to US$9,505 per tonne.

Chinese demand for the metal has slowed down and traders are expecting the US Federal Reserve to start withdrawing stimulus. At the same time, the supply side has mostly recovered from the covid-19 impact on production.

While the agency predicts a supply deficit of 153,000 tonnes for 2021, it expects a surplus of 190,000 tonnes for 2022. This compares its previous forecast of a 70,000-tonne deficit and a 116,000-tonne surplus.

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Limited supply, paired with expectations of the main copper consumers' economic recovery, low inventories and labour disputes, are likely to push prices up, Cochilco said.

Global copper demand will reach 24 million tonnes this year, up 2.4% compared to 2020, and 24.7 million tonnes for 2022, a 3% increase.

Expected 2021 copper production in Chile, the world's top copper producing nation, remains around 5.8 million tonnes.