Copper deficit is approaching

Copper producers look forward to expanding and developing new projects to meet supply shortages projected by the end of the decade. Only six major projects to build new copper mines or expand existing ones will be completed by 2020. Political controversies, technical obstacles, and lack of water and electricity are pushing back the deadlines for projects in Papua New Guinea and Peru.

Freeport-McMoRan Inc., the largest-listed copper producer, predicts the end of the metal's current surplus next year as demand improves and output falls. Chile's state-owned Codelco, the largest producer, is forecasting a deficit by 2018, while BHP Billiton Ltd., the operator of the world's largest copper mine, is seeing a deficit from 2019.

Global copper production has exceeded demand for five of the past six years, in part due to slower growth in China, the largest consumer. Copper fell more than 50 percent on the London Metal Exchange from a record $ 10,190 a tonne in 2011 to a seven-year low of $ 4,318 a tonne in January. Macquarie Group Ltd. last month cut price forecasts by 4.1 percent to $ 4,690 a tonne in 2016 and 9 percent to $ 4,788 for 2017.

Copper demand was weaker than expected in the first four months of 2016 and slower consumption growth poses risks to the strong outlook. The slowdown in global economic growth, particularly in China, remains a key risk for improved demand, analysts write. This country accounts for 47 percent of world consumption.

However, any new project disruptions could create shortages earlier than projected. "This will have implications over the next decade when supply shortages are expected," analysts said. New project delays due to lack of funding may also drive prices further. Copper prices could rise more than 40 percent by 2020, according to Meilton CRU forecasts.