Europe upstages China as main driver for copper outlook

By Pratima Desai LONDON (Reuters) - Shrinking copper demand in Europe due to a manufacturing recession caused by the energy crisis will dominate market sentiment for

some time with prices likely to retreat towards two-year lows early next year. Copper prices typically react to the ebb and flow of demand in China, which accounts for

half of global consumption estimated at around 25 million tonnes this year. But this time the focus is on Europe, accounting for 15%-20% of global demand for copper used

in power and construction. The region is facing surging gas and power prices after energy supply cuts, which Russia blames on Western sanctions over the Ukraine conflict.

The European Union has made proposals to impose mandatory targets on member countries to cut power consumption. "It would be rare to see an outright decline in demand,

but I think that's what we are going to see in Europe over the next 3-6 months," said Citi analyst Max Layton. "There will be a very substantial seasonal surplus between

December and March, the combination of which is going to bring copper down to 6,600." Benchmark copper prices on the London Metal Exchange (LME) fell to $6,955 a tonne in

July, the lowest since November 2020 when COVID lockdowns hit manufacturing activity around the world. Graphic: LME copper prices:

https://fingfx.thomsonreuters.com/gfx/ce/jnvwemdxmvw/aaaa%20LME%20copper%20prices.PNG Weak copper demand means surpluses. Macquarie analysts expect a copper

market surplus of 691,000 tonnes in 2023 from a 162,000 tonne deficit this year. They expect global refined copper production at more than 26 million tonnes in 2023.