Copper
Global copper consumption was 18.0Mt
in CY2008, expected to decrease 4.4%
to 17.2Mt in CY2009. The increase
in copper consumption in CY2009
is expected to be driven mainly by
China and other Asian countries and
more than offset by mature copper
consuming regions which are expected
to show either minimal or negative
growth in demand during this period.
Chinese demand growth is expected to
be ~5% with Western World demand
contracting almost 8-9% year on year.
On the supply side, global refined copper production (including production from scrap) was 18.4Mt in CY2008 and it is expected that production capability will reach 19.2Mt in CY2009, up 3.7%. The industry has responded well to the sharp fall in the copper price by ramping down the marginal cost operations, both mines and smelters.
Zinc
The initial recession in the US and the
subsequent fall in global manufacturing
in Q2/Q3 CY2008 resulted in
global zinc consumption falling to
11.2Mt in 2008. In CY2009, global
consumption is forecast to contract
further, falling by 5.4% to 10.6Mt.
Smelters have responded to deteriorating market conditions by exercising a degree of market discipline as they began to trim production by ramping down of high cost operations. Supply was 11.5Mt in CY2008 and is expected to reduce to 11.2Mt in CY2009.
Iron Ore
Consequent to global slowdown
witnessed since the second half of
CY2008, the world steel demand
reduced substantially and as a result,
all major steel producers of the world
announced production cuts between
30 – 50%. China, which is the biggest
producer and consumer of steel, was
also not an exception and as a result, the
demand for iron ore was significantly
affected. After steep rise in prices in the
previous years, iron ore prices sharply
fell in CY2008 and shown volatile signs
in the first few months of CY2009.
At current price levels, it is estimated that several iron ore miners, particularly those high-cost low grade projects that have come into operation in the last couple of years are uncompetitive. Globally, destocking of steel inventories is also expected to complete by mid-CY2009. We believe that iron ore price has bottomed out and with the gradual recovery of economy in China and globally, the demand-supply balance in the seaborne iron ore market would be restored in the near term.
