Copper prices will hit bottom before rising in latter part of 2012

Copper prices will continue dipping but only until the middle of this year, at which point they should start rising again, according to the latest Thomson Reuters’ GFMS Copper Survey and members of the industry.

The survey says copper prices will remain in a range of $8,300 to $8,800 per tonne in 2012. This is because “the dominant supportive factor in recent years — limited supply, particularly at the concentrate stage — nevertheless remains in place,” the report says.

Yesterday, FT reported Diego Hernández, chief executive of Chile’s state-owned copper giant said in an interview that copper would trade “between $7,000 and $8,800″ in 2012.

The last time copper cost $7,000 a tonne was at the start of October 2011, which was a level last seen in mid-July 2010.

Codelco is responsible for roughly 10% of global copper production and acts as a bellwether for the industry.

Analysts say the continued monetary easing in Europe, North America and China should underpin price levels. Prices, however, are unlikely to reverse to previous all-time highs, said Sanjay Saraf, Research Director – Base Metals at Thomson Reuters GFMS, as quoted in Business Live.

Saraf added, “there is a possibility that prices could re-test the $9,000 level later this year as improving demand and the impact of looser monetary policy drives increasing investment in the copper market. The market would, though, struggle to sustain any significant gains beyond this, given the current backdrop of heightened macroeconomic concerns and risks.”

China is also expected to play a role, as the country has consumed on average around 2.8 million tonnes per year more refined copper than is produced domestically, according to an article quoting Standard Bank. This year should see a similar outcome, before an increase to more than 3.0 million tonnes per year in 2013.

The Copper Survey also states that while all end-use sectors saw a slowdown in growth globally, the largest increase in both tonnage and percentage terms came from the electrical and electronic products sector, which registered a 5 per cent gain last year, driven by ongoing power grid investment in emerging markets.

Copper closed Wednesday at $3.667/lb on the London Metal Exchange, down from the previous day’s $3.674/lb.

With Wednesday’s close, copper is averaging US$3.746/lb in April and US$3.766/lb so far this year.

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