$5 per pound copper?Copper to hit US$5/lb in upcoming months -Copper to hit US$5/lb in upcoming months -
Barclays Capital -
By Business News Americas staff reporters
Copper prices are expected to hit US$5/lb in the upcoming months due to supply shortages, according to the most recent estimates from UK-based investment bank Barclays Capital.
As a result of the severe supply-side challenges, which are intensifying, the bank is forecasting that copper markets are heading towards a prolonged period of deficits.
"In our view, these deficits may take as long as a decade to balance out, as we expect the industry's mine supply response to be very slow. This should ultimately result in a spike in copper prices, with new highs of US$5/lb during the upcoming months likely," the bank said in its most recent report.
Incremental supply from new projects is becoming increasingly challenging and precarious due to geopolitical risk, smaller scale projects, infrastructure bottlenecks and lack of water.
The bank considers the supply challenges a structural issue, requiring persistently high copper prices to constrain demand and balance the equation.
Barclays Capital has increased its forecast for copper price averages for 2011 to US$3.75/lb and for 2012 to US$4/lb. The bank's estimate on long-term copper price is at US$3/lb, with upside risks to short and mid-term forecasts.