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G. Chandrashekhar

Mumbai April 8 Copper price recovery may continue on short-covering and positive fundamental outlook, according to experts. Demand side factors are expected to play a more crucial role in price determination over the next few months.

Recent CFTC data showed a significant cut in non-commercial short positions on Comex copper; and it was reflected in a steep decline in LME open interest over the course of March.

Price Recovery

Analysts believe, this suggested that the main driver of the recent copper price recovery had been speculative short-covering. However, in the last several days, there has been a small, but noticeable pick up in LME copper open interest indicating that fresh buying of copper is now starting to play a more important part in price direction.

If this continues, further price gains look likely. Most market participants have a cautiously positive view of copper market fundamentals. Although supply growth is seen as accelerating this year, the increase is likely to be gradual and fairly modest, according to experts.

Price Risk

Notwithstanding uncertainties of US economic slowdown, demand for copper in China is expected to be much stronger than in 2006. Imports may, however, slow for a short while after the high level of buying seen recently.

LME copper stocks are now less than 1,00,000 tonnes above their 2006 lows, while many consumers and merchants are yet to cover their physical requirement. All these translate to significant upside price risk in the second quarter. Analysts forecast prices to move higher and see further steepening of the copper price curve.

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