THE copper price, which has been leading the base metals recovery, is set to fall next year because of declining imports to China.
Deutsche Bank's resources team is forecasting a weakening copper price in the first half of 2010, despite upgrading its long-term price, because of expectations that the economic powerhouse's net copper imports could fall by about 30 per cent.
The team of analysts led by Paul Young said copper would continue to trade around $US3 a pound for the balance of this year, driven by the continued recovery of Western economies and supply uncertainty, but most of the good news was already priced into the commodity.
"While it's possible that new money is allocated to the copper market in the new year as investors look with fresh eyes for opportunities, we believe that strength could be short-lived," Mr Young said.
"The recovery in consumption growth - that surge in apparent demand - is largely history in our view and we see a deceleration in demand next year."
China has been driving a rise in demand across the resources sector, but its hunger for copper is tipped to slow next year, though the decreased levels will still be much higher than the "normal" level of imports.
"We expect that the market would take this change negatively," Mr Young said.
"We do expect that the Chinese government will continue spending in 2010, but the inventory element that supported prices in 2009 will likely be missing in 2010."
The resources sector has been enjoying a lift in sentiment and activity has been picking up but Mr Young warned that the recovery in global growth had largely run its course and growth rates over the next 12 months were likely to be much lower than the previous 12 months.
On the longer-term price, the team at Deutsche said under-investment, declining grades and ageing mines were all conspiring to constrain copper output over the next three to five years.
"Much of the growth in the global copper market in the past has been a function of a few very large mining operations," the report on copper said.
"These mines are no longer contributing meaningfully to supply and it is up to a new generation of mines to fill the void.
"The problem for the market is that there are no obvious heirs to these ageing giants."
