2015 May Set Copper Scene for Years Ahead

The International Copper Study Group estimate of copper usage in the first quarter of 2015 is 2.8% lower than its estimate of usage in the corresponding period of 2014. With refined production having risen by 4.7%, the market balance is tilting toward lower prices. Current usage rates could have a dramatic impact on prices for several years. Three percentage points in market size is equivalent to slightly more than 50% of estimated refined inventories at the end of 2014. If sustained for a year, the difference between the first quarter growth rate and 3% average growth is equivalent to 100% of end-2014 inventories. If consumption does not grow in 2015, inventories could remain above current levels for the next five years (with plausible assumptions about output growth) even if consumption grows at an above average rate subsequently. The corollary is also true. Anything better than average growth in 2015 would set the scene for historically strong market conditions. But that possibility is receding.