Copper demand will outstrip supply for the next two years as the economy recovers, China sustains consumption and mine output drops, Japan’s top producer said. Demand will likely exceed supply by 635,000 metric tons in 2011, the biggest deficit since 2004, compared with 234,000 tons last year, Hidenori Kamoo, general manager of the marketing department at Pan Pacific Copper Co., said in an interview Jan. 18. The shortage may be 91,000 tons in 2012, he said. Copper, used in wires and pipes, climbed to a record of more than $9,780 a ton yesterday after gaining 30 percent in 2010 as the world economy recovered from its worst recession since World War II. Goldman Sachs Group Inc. says the price may climb 12 percent in the next 12 months to $11,000 a ton. Michael Jansen, metals strategist at JPMorgan Securities Ltd., predicts a deficit of 500,000 tons to 600,000 tons this year. “The market will see a wider deficit because of steady demand growth in emerging markets, including China and Brazil, a gradual economic recovery in the U.S. and Europe and tight mine supplies,” Kamoo said. This year’s deficit would be the most since 2004, according to company data. While there is likely to be a shortage, growth of copper consumption in China, the biggest user, may almost halve this year as the government curbs monetary expansion, cooling demand, Jansen said Jan. 15. Macquarie expects a shortfall of 550,000 tons, while the International Copper Study Group expects a shortage of 435,000 tons. China Stockpiles China last week told banks to set aside more deposits as reserves for the fourth time in two months, stepping up efforts to rein in liquidity and cool inflation after foreign-exchange holdings rose by a record and lending exceeded targets. Stockpiles at Shanghai Futures Exchange warehouses expanded to the highest level in seven months, adding 481 tons to 132,647 tons last week, according to the bourse. Copper supply is adequate in China and a “price spike” is unlikely before the Chinese Lunar New Year, Goldman said in a report Jan. 17. Morgan Stanley projects copper prices will average $4.45 a pound in 2011, up 24 percent from an earlier estimate, the bank said in a report Jan. 18. Pan Pacific projects global consumption will climb 5.1 percent to 19.72 million tons in 2011, from last year’s 8.6 percent increase to 18.76 million tons, Kamoo said. China’s demand is expected to expand to 7.7 million tons from 7.04 million, he said. Global Demand “We may see global demand exceed 20 million tons in 2012 for the first time,” Kamoo said. Last year, the market swung back to a deficit for the first time since 2007 because of an unexpected increase in demand following heat-waves and better- than-expected car sales in China, he said. World production may increase 3 percent to 19.08 million tons this year after growing 1 percent to 18.52 million tons, he said. In 2012, output may expand 6.2 percent to 20.26 million tons, he said. China may produce 4.95 million tons in 2011 versus 4.5 million tons in 2010, he said. China produced 4.37 million tons of refined copper in January-November, or 13 percent more than a year earlier, according to the National Bureau of Statistics. “Until we see a significant increase in mine supplies from 2013, the market will remain in supply deficits,” Kamoo said. Tight supplies may push copper prices up as high as $11,000 a ton this year, he said. To contact the reporters on this story: Jae Hur in Tokyo at jhur1@bloomberg.net; Ichiro Suzuki in Tokyo at isuzuki@bloomberg.net To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net.

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