December 7, 2018 / 8:52 AM / 5 days ago

Japan's Pan Pacific sees copper rising toward $7,000/T in 2019

TOKYO, Dec 7 (Reuters) - Pan Pacific Copper (PPC), Japan’s top copper smelter, expects the price of the industrial metal to rise toward $7,000 a tonne in 2019, from about $6,168 now, backed by firm global demand and tighter supply, its executive said.

PPC, which is also a miner controlled by JXTG Holdings , expects global consumption and supply of refined copper to each increase by 2.2 percent in 2019 from this year, Takeshi Suwabe, Pan Pacific’s general manager for marketing, told Reuters this week.

“With support from physical buyers, copper prices are likely to try $6,400 level in the short term,” he said.

Three-month copper on the London Metal Exchange has fallen 15 percent this year amid worries that the months-long U.S.-Sino trade war may hurt the global economy including China.

But Suwabe said global copper sales have been solid despite the trade spat and the price will likely climb toward $7,000 - the level needed for miners to start developing new mines - in the latter part of 2019 to reflect a tighter market.

PPC sees the global refined copper market facing a shortage of 236,000 tonnes next year, compared with a deficit of 211,000 tonnes this year.

“Demand growth in China and the United States may slow a bit but global demand will stay sound,” Suwabe said, pointing to strong infrastructure demand in China and healthy auto sales worldwide.

“As for supply, China’s new smelting capacity will help bolster global output, but troubles or maintenance at existing smelters to meet stricter environmental rules worldwide are expected to weigh on production,” Suwabe said.

The closure this year of Vedanta Resources’ 400,000-tonne per year Tuticorin plant in the Indian state of Tamil Nadu has flipped India from being a net exporter of refined copper to a net importer, drastically reshaping physical copper flows.

Last month, Chinese copper smelter Jiangxi Copper and Chilean miner Antofagasta have agreed 2019 copper treatment and refining charges (TC/RCs) at $80.80 a tonne and 8.08 cents a pound, down from the 2018 benchmark of $82.25 and 8.225 cents.

The 2019 charges should have been higher or flat from this year, said Shunji Iwanami, general manager for raw materials at PPC.

“We were truly disappointed as we had expected higher or at least flat level as the global ore market is expected to see a surplus of 360,000 tonnes next year, just like this year,” he said. (Reporting by Yuka Obayashi Editing by Manolo Serapio Jr.)

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