Copper extends 15% gain since August as market swings into huge deficit

On Friday spot copper was up again at $3.79 a pound in early afternoon dealings in New York – a 15% improvement just since the beginning of August – after a new report by the International Copper Study Group showed the market for the red metal swung into a substantial deficit during the first half of 2012.

According to ICSG, the refined copper market balance for the first half 2012 indicates a seasonally adjusted deficit of 292,000 tonnes (473,000 tonne deficit when not taking into account seasonal factors). This compared with a surplus of 56,000 tonnes during the same period last year.

Previously ICGS predicted a shortfall of 237,000 tonnes for the entire 2012. This H1 figure is also much higher than previous estimated by the World Bureau of Metals Statistics which in its analysis calculated a 129,000 tonne deficit.

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Supply in the global copper market has long been tight and is getting tighter. Primary mine production grew just 2.4% in H1 2012, but global usage expanded 7.3%, mainly thanks to Chinese imports which ICGS notes could be a factor of stockpiling not actual usage.

Copper's recovery from year lows over the summer also comes on the back of renewed hopes the Chinese government's $157 billion infrastructure programmes will boost demand.

World annual refined copper usage has increased by 31% over the last decade from 15.2 million tonnes to 19.9 million tonnes almost entirely on the back of increased Chinese consumption. The country's usage shot up 185% and China consumes 43% of the global supply of the red metal currently. That's up from 18% in 2002.