An uncertain outlook for the global economy, coupled with sluggish demand from top consumer China are set to weigh on copper this year, with prices expected to stabilise in 2013, a Reuters poll showed.
The survey of 32 analysts was carried out over the last three weeks. Not all an average of around $8,812 for the London Metal Exchange's (LME) cash contract in 2011.
There continues to be risks to the economy and we see near recessionary conditions for the first part of the year before we slowly emerge thereafter, said Daniel Brebner, head of metals research at Deutsche Bank. contributors responded to all questions.
It showed average cash prices for the metal used in power and construction will dip by 5 percent year-on-year.
The consensus showed the cash copper price would average $8,369 a tonne this year. The price is seen rising to $8,859 a tonne in 2013, according to a consensus of 28 forecasts.
Those compare with an average of around $8,812 for the LME cash contract in 2011.
The global economy risks falling into recession as Europe grapples with a debt crisis and the U.S. recovery remains uncertain, factors which contributed to benchmark copper posting its first annual fall in three years in 2011.
We'll still see relatively elevated prices for metals compared to where they were 10 years ago. So this will still be a bull market but I would suggest there won't be the kind of appreciation in prices that we've seen in the recent past.
The lower forecasts also reflect expectations of a slowdown in China, which is the biggest consumer of copper, where a cooling property sector is likely to hit demand for metals and knock as much as 2 percent off growth this year.
Adding to the downbeat outlook, months of net imports in copper and a closed arbitrage window mean China is unlikely to continue restocking the metal on a massive scale in the short-term.
China's copper imports rose 13 percent to a record high in December, supported by favourable arbitrage and the use of copper as a financing tool. China is the world's largest copper consumer, and monthly import figures have been climbing since June 2011.
Given the fact that we think they have already restocked and fabrication rates have fallen off quite sharply over the last quarter and premiums are down... its difficult to see what would cause Chinese traders to buy copper, said David Wilson, analyst at Citigroup.
That would be a complete break from the buying behaviour we saw throughout the whole of the second half of last year.
The easing demand picture comes at a time when production is expected to recover, following industrial action last year at the world's biggest copper mines, including Escondida in Chile, Grasberg in Indonesia and Cerro Verde in Peru.
Analysts expect a deficit of 101,000 tonnes this year, limiting the downside to prices, with the deficit narrowing to a 12,000 tonnes in 2013 as new capacity comes on stream.
Production will lag behind demand... creating a deficit that can be met by LME and other stocks, said Nick Trevethan, senior commodities strategist at ANZ Research.
However a repeat of the supply shocks seen in 2011 could stretch the availability of supply and create the risk of price spikes.
For a graphic on prices vs 2011 average
For aluminium, used extensively in transport and packaging, the cash price will expected to average $2,257 a tonne this year, down 6 percent from an average of around $2,398 in 2011, as the industry grapples with high energy costs.
The average of 15 forecasts showed the aluminium market would see a surplus of 600,000 tonnes this year, narrowing to a surplus of 415,000 in 2013.
We expect aluminium to show a surplus for the six and seventh year in 2012 and 2013, but provided costs of capital remain low this excess will be warehoused, said VM Group analyst Carl Firman.
Stocks of aluminium in LME warehouses have hit record highs above 5 million tonnes, but only a fraction is available to the market due to bank financing deals which have locked-up about 70 percent of the metal sitting in sheds.
Lead prices will outshine zinc this year as the galvanising metal continues to struggle with high stocks and another year of surplus, the poll showed.
Cash lead is expected to average $2,200 a tonne in 2012, from $2,396 a tonne last year.
Tin is expected to be the only other metal apart from copper to register a deficit this year, of 5,000 tonnes, helping put a floor on prices which are seen averaging $22,125 a tonne.
(Editing by William Hardy)