Markets For Copper Into The Millenium: A New Approach To Copper Market Forecasting

For nine years, from mid-1987 to mid-1996, the copper market enjoyed what appeared to be an endless boom in which prices were much higher relative to production costs than for most other base metals. After the boom ended abruptly mid-1997 with the Sumitomo affair, copper was burdened by an overhang of new projects that promised to swamp demand in what, with the Asian financial and economic crisis of 1997, had become a considerably worse consumption environment. Now, demand prospects do not look so bad. If, as we suspect, we will be dealing with a more rational market in the future, it becomes all the more important to forecast accurately the prospects for consumption. In this paper, we present a new methodology for copper demand forecasting. The methodology forms the backbone of the demand-side analysis for the multi-client study entitled "Long Tenn Outlook for Copper", co-authored by Metalica Ltd. and Bloomsbury Minerals Economics (BME). Key components of the methodology are as follows. (1) Relate demand to economic structure. (2) Focus on products rather than refined consumption. (3) Apply a consistent products/applications analysis to all countries and time series. (4) Incorporate scrap market dynamics within the analytical framework.