* Copper surplus forecast at 98,500 T in Reuters April poll
* Some analysts scaling back forecasts after mining problems
* Potential for labour strife in Chile ahead of elections
By Melanie Burton and Eric Onstad
SINGAPORE/LONDON, May 24 A series of copper mine
shutdowns and supply logjams has prompted some analysts to scale
down forecasts for a market surplus, but it would take more
disruptions to swing the market into a deficit.
"People are making adjustments, we certainly are. At the
beginning of the year we were pencilling in a 300,000 tonne
surplus. That's probably going to be pegged back by half or so,"
analyst Robin Bhar at Societe Generale in London said.
"Demand is down as well, so one offsets the other. I don't
think we'll have a deficit market again but certainly a more
The forecast surplus has weighed on benchmark copper prices
, which have shed 13 percent since touching a peak in
February of $8,346 a tonne for the year so far.
The global market for refined copper was expected to have a
98,500 tonne surplus this year and 305,000 tonnes in 2014, based
on the average forecast of 18 analysts polled by Reuters in
April. The 2013 estimate was already scaled back from a 127,000
tonne surplus forecast in January.
Those April forecasts came shortly after a rockslide at Rio
Tinto's Bingham Canyon copper mine, which the
company said would reduce production by about 100,000 tonnes.
But they were made before the world's second-biggest copper
mine, Grasberg in Indonesia, shut this month after a tunnel
collapse killed 28 workers. Owner Freeport McMoRan Copper & Gold
has said it will not reopen the mine until it is certain
conditions are safe.
On top of mining issues, plants in China, the world's top
producer of refined metal, have been cutting back capacity due
to a shortfall in the scrap metal they use as a feedstock, while
India's top two smelters have been shut due to pollution
Because copper production often falls short of forecasts due
to mining accidents, labour disputes, ore degradation or power
shortfalls, analysts typically factor in a production disruption
level of between 800,000 to 1 million tonnes, around 4 to 5
percent of the 21 million tonne market, Leon Westgate at
Standard Bank in London said.
"I think people cut that (disruption rate estimate)
significantly this year in expectation the industry would get
its act together," he said.
"The year started well, but a drip feed of disruptions has
started to build over the past couple of months," Westgate
added. He has not yet revised his forecast for a 150,000 tonne
surplus this year, however.
STOCKPILES AT GRASBERG
At Grasberg, a trade union official said all investigations
into the tunnel collapse must be completed before workers
"If they have found a problem in the rock mechanics, they're
going to have to do something about it before they send people
down the mine shaft again. This may take some time," said Matt
Fusarelli at consultancy AME Group in Sydney.
Since Grasberg has ore stockpiles, many analysts including
Fusarelli have held back from revising forecasts of its output.
"But we are obviously watching it, and it's probably more likely
than not that we will see lost production."
Sanjay Saraf, head of base metals research and forecasts at
Thomson Reuters GFMS, said the consultancy has built in 420,000
tonnes for disruption for the remainder of the year, which is
equivalent to around eight to 10 months of output from Grasberg.
"But there will undoubtedly be further disappointments
elsewhere in the coming months, so we could well see this
allowance being tested," Saraf told the Reuters Global Base
GFMS forecasts a copper surplus of 232,000 tonnes this year.
"You've also got the Chilean presidential elections in
November, so you may see there is the potential for an increased
frequency of industrial action, and also with elections in
Indonesia," Westgate said.