Prices for electrolytic copper are expected to drop slightly this year due to a sharply increased supply in global markets, says the National Development and Reform Commission (NDRC) in a report released Tuesday.
It says the average international price of copper will drop slightly to about 60,000 yuan (7,692 U.S. dollars) per ton because of the output growth of copper-concentrate ore, the main raw material for producing electrolytic copper.
Meanwhile, affected by a clear surplus in supply and price decline in raw materials, the price of electrolytic aluminum will fall significantly, the report says.
The annual average price of electrolytic aluminum is expected to remain at around 18,000 yuan (2,308 U.S. dollars) per ton in 2007, a year-on-year decline of 11 percent.
In 2006, the price of copper rocketed from 4,440 U.S. dollars per ton on Jan. 3 to a record 8,800 U.S. dollars per ton on May 11, with the annual average price up by 75 percent compared to 2005.
Spurred by the tremendous rise in copper prices in recent years, the construction of copper smelting facilities was on the rise in China,greatly increasing market supply.
The labor dispute at Escondida mine in Chile, the world's largest copper mine, was resolved successfully and production was back on track. This also contributed to the downward price trend of international copper, according to the report.
Copper for delivery in three months on the London Metal Exchange (LME) fell to 5,630 U.S. dollars per ton on Jan.16, down by 120 U.S. dollars.
Chinese domestic copper prices usually keeps close pace with the international market. The fall in the world market also cast a shadow on China's market.
Copper futures plummeted to the daily allowable limit on the Shanghai Futures Exchange yesterday, closing at 51,990 yuan (6,665 U.S. dollars) per ton, decreasing as much as 2,170 yuan (278 U.S. dollars).
The report says there is still a strong demand for copper in Chinese real estate, automobile and electricity sectors. The domestic copper price will continue to drop, but with a small margin in 2007.
In China, the growth in output of electrolytic aluminum will exceed that of domestic consumption in 2007, with an estimated supply surplus of one million tons. A 15 percent levy was also put on aluminum exports in November last year.
These factors will bring down the price of electrolytic aluminum, according to the China Nonferrous Metals Industry Association.
Market watchers predict that base metals such as aluminium, copper and nickel will be in short supply again as 2008 kicks off because the global economy is gaining strong momentum.