What are the prospects for the copper price for the remainder of this year? In a word - uncertain. Having risen so far, so fast this year - the LME three-month contract has gone up by more than 100% since the start of 2009 - a price correction looks overdue. However, two dynamics are currently keeping the market on its toes - the ups and downs of China's copper import demand, and the shape of the recovery in the OECD region. How these dynamics shape up in Q4 2009 will help determine whether or not copper ends this year with a bang, or a whimper. As of mid-October the copper market has been trying to work out whether improved economic sentiment has been excessively optimistic, and has priced-in too rapid and too vigorous a global economic recovery. The fact that the copper price has stabilized at around $6,100/t (+/- $400/t), while China's refined imports of copper declined month-on-month in July and August - against a succession of monthly record imports in prior months - and rising LME copper warehouse stocks, implies that sentiment is still very positive regarding copper's mid to long-term fundamentals. This positive sentiment was reinforced by data showing that in September China's imports of unwrought copper and copper products recommenced their upward trend, which had been interrupted in July and August. These September copper imports, at 399,052t, took everyone by surprise - and re-ignited the assumption that, after all, China would continue to support prices, even though some of this material would be destined for internal stockpiling, currently at around 1 Mt. This does not stray far from the general trend throughout this year, whereby the rally in copper and other base metals - with the possible exception of aluminum and tin - has been driven entirely by China's appetite for raw materials, be it for consumption or restocking. But also supporting sentiment of late is the growing evidence that the extremely severe US recession has ended, even though the aftermath (unemployment continuing to rise and uncertainty over the shape and speed of the recovery) overhangs sentiment like a sword of Damocles. Even with apparent Chinese demand softening during July-August, the copper price has remained range bound between $5,800/t-$6,500/t (LME three-month contract). What's significant about copper's price rally this year is that it testifies to the recession-proof nature of speculative investment, not just in copper, but numerous other commodities that face a compelling fundamental, supply - demand outlook . Back at the start of this year the mood in the markets couldn't have been more different. The consensus forecast from a poll conducted in January by Reuters was that the copper price this year would average $3,417/t. The same poll found that the average forecast for the copper market balance in 2009 was for a world surplus of almost 325,000t. A refreshed Reuters' poll in early October 2009 naturally saw that average price at a much higher level, approaching $5,000/t, while the projections for a surplus have not just disappeared, but turned into a deficit. Yet it is crucial to note that this deficit is merely apparent, since in reality the market is indeed in massive surplus, if allowance is made for the hefty restocking that has happened in China since late 2008. The speculative investment interest has not only helped double the copper price this year; it has also affirmed that, in its view, what copper China has sucked up this year will not be flooding back on to international markets any time soon. That's a gamble, of course - but not necessarily a foolish one. The longer that China holds onto its accumulated copper stocks the tighter the market will be once Western world recovery gets truly underway. China's refined copper production and imports were 50% higher in the first eight months of 2009, at 4.93 Mt, compared to the same period last year. China has been stocking up on copper as though it fears the metal will soon become not just expensive, but positively scarce. Maybe the Chinese are insightful as far as stockpiling is concerned - but this depends on what you mean by 'soon'. For most short-term copper market participants, 'soon' is likely to be at the end of next week (at the end of October 2009); for China, it's the end of the next decade.

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