Copper deficit story dead

"Over the last quarter, the COVID-19 pandemic has developed from an emerging threat into a very significant reality," Davidson said on a webinar.

CRU believes Chinese copper demand slumped by 22.1% in the March quarter, while demand for the rest of the world dropped 12.1%.

The consultancy now expects copper demand for China to fall 5% in 2020, and 6% for the rest of the world.

Davidson said it would represent the biggest downturn since the 1970s and China`s first year of negative growth since 2006.

CRU has lowered its 2020 demand forecast from January by 1.8 million tonnes to 22Mt, with China to account for 800,000t and the rest of the world the other 1Mt.

"While we expect a demand recovery in 2021, and we`re forecasting global growth of 4.6%, the effects of the pandemic are expected to be long-lasting, and at no point in time do we expect copper consumption to return to previously forecast levels within the years to 2024," Davidson said.

"This is the key reason we no longer believe a market deficit will develop in this market by the mid-2020s."

More than 330,000t of copper has been impacted by COVID-related cutbacks and CRU sees close to 700,000t as being under threat.

Another 159,000t has been impacted by price-related cutbacks, mainly by Freeport-McMoRan, with more expected.

CRU sees a 5% decline in production in 2020, before a 4.6% rebound next year.

The firm previously forecast 850,000t of copper production from uncommitted projects in 2024, which has now been reduced by more than 300,000t.

"Our base case view is that without price-related cutbacks, the copper market will suffer persistent and unstainable surpluses over the next five years," Davison said.

CRU sees a copper cathode surplus of nearly 850,000t this year, which could balloon to 2Mt by 2024 without cutbacks.

Its copper price forecast for 2020 has been revised down to US$5200 per tonne, which is around current levels, from $6300/t.

The price could hit $6600/t by 2024, down from CRU`s previous forecast of $7150/t, which Davidson said would be too low to incentivise new production.