London, 4 October 2011

The International Copper Study Group (ICSG) met in Lisbon, Portugal on 26-27 September 2011. Government delegates and industry advisors from most of the world’s leading copper producing and using countries met to discuss key issues affecting the global copper market. In its meeting of the Statistical Committee, the ICSG view of the world balance of refined copper production and use was developed.

Copper Market Forecast 2011-2012: According to preliminary ICSG data, global growth in copper demand for 2011 is expected to exceed global growth in copper production, and a production deficit of about 200,000 metric tons (t) of refined copper is projected for the full year. For 2012, ICSG data projections indicate a deficit of about 250,000 t as supply growth will continue to lag behind demand growth. By 2013, however, increased production and lower growth in demand are expected to yield a nearly balanced market.

Note that for China, the leading global consumer of copper, apparent copper usage is based only on reported data (production + net trade +/- SHFE stock changes+/-industry stock changes, if reported) and does not take into account changes in unreported stocks [State Reserve Bureau (SRB), producer, consumer and merchant/trader], which may be significant during periods of stocking or de-stocking. Thus, the ICSG calculated apparent growth for China in 2011 was less than 1%, which is significantly less than their projected growth in semifabricate production.

In developing its projections, the International Copper Study Group recognized that numerous factors including a world economic slow down, European Union sovereign debt issues, political disturbances in the Middle East and North Africa, and market price volatility create significant uncertainty, and that the global market balances could vary from those projected in the first half of 2011, operational problems, lower head grades, adverse weather conditions and labor unrest combined to constrain mine output, and production for 2011 is now anticipated to grow by only 0.7%. Capacity utilization rates for 2011 are expected to be around 79%, 1% lower than in 2010. Although producers anticipate a strong growth of 9% [1.5 million metric tons (Mt)] in 2012 (mainly due to higher capacity utilization at existing mines as few new projects are expected to start), it is expected that the actual increase will be significantly lower as production disruptions, which have become the norm in recent years, continue. World refined copper production for 2012 (adjusted for production disruptions) is therefore projected to increase by only about 3.4% to 20.1 Mt from 19.5 Mt in 2011. Secondary refined production (from scrap), which is anticipated to increase by around 10% in 2011, is expected to grow by only 5% in 2012.

ICSG expects world apparent refined usage in 2011 to grow by only 1.5% from that in 2010 to 19.7 Mt. The 0.7% growth rate of the first half of 2011 is anticipated to improve to 2.3% in the second half owing to an expected recovery in China apparent usage. China apparent usage declined by 6% in the 1st half of the year (due to a 40% decrease in refined copper net imports) and partially off set growth of 6% in the rest of the world. In the second half a recovery in Chinese usage is expected to offset weaken usage levels in the United States, Japan and the EU. For 2012, world usage is expected to grow by 3.6% mainly supported by a growth of 6% in China as the rest of the world is expected to grow by only 2%.

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