Copper prices likely to decline by end of 2016

Copper prices have grown by more than 10% since the beginning of 2016. This appears as a turn in the outlook of copper; however, prices are likely to weaken in the future, along with a surplus of the product this year, noted Barclays.

Recently, China has performed quite well, as compared to negative outlook. In 2015, demand for copper rose 3.9% y/y. However, the demand is expected to grow 2.75% in 2016, according to Barclays. However, it is better to be wary regarding China as the turn in data might not be sustainable, added Barclays.

Last year, copper consumption weakened in major emerging nations such as Russia and Brazil. Demand for copper dropped 47% y/y in Russia and 17% y/y in Brazil. The emerging markets are likely to expand moderately this year. About 1mnt of new supply is expected to come online in the coming two years, noted Barclays.

“We think that this supply wave, coupled with a stalling of China’s stabilization, will combine to push prices lower by the end of the year, and we retain our forecast for the copper price to average $4,420/t LME cash (200 c/lb) in 2016”, said Barclays.