Copper demand expected to settle back

The copper “boom” appears to be coming to an end, according to any number of analysts, including Raymond Goldie of Richardson Greenshields.

Supply of the base metal in 1988 in the Western world will jump by about 10%, says Goldie, not allowing for “accidents” such as strikes and other disruptions.

Demand, on the other hand, will drop to about 2.5% this year, well down from the more than 8% annual growth witnesssed since mid-1986.

Copper prices will tend to decline in 1988, although rallies are expected in response to “accidents.”

As pessimistic as Goldie may sound on copper prices, he says he is not as bearish as stock-market investors, who appear to be expecting the worst for copper prices this year.

Copper, which averaged 81 cents (US) per lb in London in 1987, compared with 62 cents in 1986, topped $1.40 during the latter part of last year. The London office of the large securities firm Shearson Lehman is predicting an average price for 1988 of 90 cents ; the base metal has been selling in the $1-$1.10 range of late.

On the supply side, Goldie sees a rise in both primary production and recycled scrap, with that increase to be partially offset by a drop in exports by Communist nations.

On the demand side, Goldie, who had been using a growth rate of less than 1% for his calculations, now says that between 1983 and the end of 1987, demand rose at an annual rate of 2.8%, similar to the world economy. Since June, 1986, Goldie says, that rate has been even higher, running around 8.3% (thanks in large part to stronger economies in the Pacific Rim and Brazil).

Assuming a slowdown in the economies in the Pacific Rim and Brazil (his “most likely” scenario), with the growth in copper consumption levelling off at 2.5% annually, Goldie foresees world copper prices remaining strong for several more months and inventories staying low for most of the year.

The current high level of gold loans has depressed the price of the yellow metal, says the international firm Barclays de Zoete Wedd. The level of gold loans should fall by early summer, the company says, with the gold price then recovering.

Banks will advance gold loans, the company says, only to producers in politically stable regions, and they will only advance a fraction of a mine’s annual output, certainly no more than half.

The company expects total eligible gold production to be no more than 500 tonnes, providing an upper limit of 250 tonnes on loans. With 130 tonnes of loans having already been written, 120 tonnes remain available for loans.

Loans are currently being written, the company says, at a rate of 30 tonnes (about one million oz) per month. Not every eligible producer will require gold-related finance, and the company therefore expects the rate of gold loans to fall in a few months time.

Recently arranging a million-oz gold loan, worth about $448 million(US) and to be repaid over a five-year period, was Newmont Mining of New York.

Demand for antimony appears to be growing stronger, Roskill reports. Consumption in batteries, after more than 10 years of decline, is now stable or slightly growing, the company says, and demand for antimony compounds, for use in flame retardants, for example, will continue to rise.

The changing patterns of consumption in batteries will in addition result in strengthening the demand for primary antimony, Roskill says.

The dominant metallurgical end- use continues to lie in batteries, in particular those used in motor- vehicles, the company says. In the U.S., lead-antimony has steadily declined in favor of lead-calcium in the production of maintenance-free batteries. Elsewhere, concern with maintenance-free batteries has been weaker.

In the U.S., new “hybrid” batteries, using calcium in the negative and antimony in the positive grids, will result in renewed growth in the use of antimony. Outside the U.S., Roskill says the use of antimonial lead containing 2% antimony is widely accepted as producing a “maintenance-free” battery.

Unit consumption of battery lead per vehicle is likely to increase because of the impending introduction of dual battery systems to cope with the proliferation of ancillary electrical equipment. Demand for antimony in batteries, Roskill says, is thus likely to increase at a time when the availability of secondary antimony has declined.