From a major slump in both demand and prices just 12 months ago, copper has made an amazing recovery to where it is today. The fundamentals remain relatively solid for copper. China demand kicked off initially through SRB-led restocking. As the year progressed, stimulus-supported investment took over driving demand and in the second half consumption by consumer-led manufacturing has created a sense of strongly rising demand. In practice, supply has continued to outstrip demand but unlike aluminum, it has not been enough to run up massive global inventories.
Many are asking themselves did the supercycle merely experience a blip? Did the severity of the downturn push the copper market into temporary paralysis only for the old supercycle fundamentals to reassert themselves once the dust had settled? Are we now seeing a return to the relentless and long-term rise in the copper price driven by never-ending Chinese demand growth squeezing an ever tighter supply market? Maybe—certainly as consumer of half the world's copper, China's likely demand in the year ahead will have a profound impact on the price. But the restocking is now over and real consumption is coming to the fore as opposed to the apparent (real plus inventory build) consumption we were seeing last year. As the China Central Bank gently applies the brakes, speculative buying may become less attractive if bank lending is tightened in China. As the copper price fell in 2008, large volumes of primary metal were imported, as scrap became hard to find. This year, as higher copper prices stimulates greater scrap production the effect may be to dampen primary metal demand. What will be the interplay of these forces on the copper price in 2010?
MetalMiner's 2010 copper price perspective addresses all of these issues and provides additional insight into the copper market. Written from the sourcing professional's point of view, the report identifies the key drivers impacting copper prices. The report also contains a quarterly price prediction for 2010 along with additional analysis on the dynamics behind supply and demand.
Readers can learn more about MetalMiner's Copper Price Perspectives series here.
Copper Price Predictions: 2010
Source: MetalMiner, Stuart Burns (2/23/10)
"China's. . .restocking is now over and real consumption is coming to the fore"