The Hindu Business Line : Copper prices to stay firm

Combination of low stocks, under-hedged consumers and renewed speculative buying inspired by a firmer euro are all cited as factors behind the move higher this week.

Copper prices rose a sudden 1.5 per cent on Wednesday to close at $3,285 a tonne and trading just a few dollars shy of its all-time high. Nickel too was up 4.5 per cent to close at 16,400 a tonne.

Inventory levels are at critical lows, and continue to fall; and in this high price environment, both consumers and investors have been left behind as they have been waiting for better buying opportunities on rising supplies, commented base metals analyst with Barclays Capital, Ms Ingrid Sternby.

Metal production is indeed responding to higher prices. For instance, copper mine output is up sharply from last year. But it could be a temporary reaction, warn experts. Additional mine output from the world's largest copper producer Chile will be substantially lower in the coming years

The trend of lower output growth from Chile (2.8 million tonne during 1990-1999 versus projected 1.1 mt during 2000-2009) and other parts of the world is the result of low exploration spending in recent years and reflects an underestimation of large requirements driven by China. This will leave the copper market tight for some time and support higher long-term prices, Ms Sternby explained adding that there is potential for continued upside pressure on prices next year when inventories will not have built sufficiently to compensate for lower supply growth .

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