The metal has more than doubled from the low of $3,051/tn.
Copper is expected to hit $6,500 a tonne soon and $7,500 a tonne next year and may continue the upward move until 2012, said the London-based leading research firm Gold Field Mineral Services (GFMS).
Copper has been at the forefront of the rally in base metals. The cash quote has more than doubled from the low of $3,051 a tonne to a recent high of $6,419 a tonne. Although prices have slipped 5 per cent since this peak on profit booking, a recovery looms, said the report.
Strong Chinese consumption coupled with expectations of a recovery outside the country late in the year are expected to strengthen demand marginally in 2009 as also lower production. As a result, the surplus projected for 2009 has been revised downwards to just 245,000 tonnes from the earlier estimate of 441,000 tonnes.
Coupled with some profit-taking by investors, the substantial decline in unreported inventory especially in China will drive a decline in copper prices in the short-term. Nevertheless, as the trends in supply and demand are clearly suggestive of a noteworthy improvement thereafter, this is expected to be short-lived, with funds and end user front-running triggering a move to deficit in 2010, setting a positive trend for the price from fourth quarter this year. If the price hits the estimated level of $6,500 a tonne, it may generate a fourth quarter average of $6,000 a tonne, resulting in a full-year figure of $4,900 a tonne. The red metal may average out at $6,500 a tonne in 2010.
Inevitably, the focus of the market in July-August has been on the impact of investment funds. However, there has been support from the underlying fundamentals. GFMS forecasts that global concentrate production will decline by 1.6 per cent this year following no growth in 2008. Latest developments in spot treatment charges reflect this situation, and the decline in spot treatment charges and refinement charges (TC/RCs) is sending “bullish” long-term signals to the copper market.
In the key Chinese market, spot TC/RCs in early August have fallen to $20 a tonne (2c/lb) from $40 a tonne (4c/lb) in June and $90 a tonne (9c/lb) at the beginning of the year. A strong recovery in consumption coupled with slower mine production (and by implication refined production) growth are the architects of the 88,000-tonne deficit GFMS forecasts for 2010.