Metal reaches record high as global recovery awakens concerns about supply
LARGE diversified mining companies and smaller pure-play copper companies turned in a strong performance on Monday when the price of the metal scaled new highs over concerns about supply matching demand and continuing buying.
Metorex , which produces copper in Zambia and the Democratic Republic of Congo, was one of the top five gainers on the JSE, adding 4,2% to reach 546c.
Anglo American, a large diversified group that has copper as one of its core divisions, put on 1,4% to R347,80 and BHP Billiton , the world’s largest resources group by market capitalisation, gained nearly 1% to R267,75.
The metal "is a barometer of the health of the economy", said Matthew Zeman, a metal trader at LaSalle Futures Group in Chicago. "People are getting the message that the global recovery is gathering steam. Supply is not going to keep up with demand. China will be back in the market for additional copper."
Copper supplies were forecast by Kevin Norrish, a director of commodity research at Barclays Capital, to reach record low levels around the middle of this year, which would push prices for the metal to record highs as demand outpaces supply.
Barclays expected copper prices to trade consistently above $9000 a ton this year, peaking to an average of $9950 in the third quarter, meaning it would breach $10000 around then, Mr Norrish told Business Day in November.
Copper stockpiles in London Metal Exchange warehouses shrank 25% last year, the first annual decrease since 2004.
Inventories monitored by the Shanghai Futures Exchange dropped 30% from last year’s high of 189441 tons in April, boosting the demand outlook in China, the world’s largest user.
The International Copper Study Group is expecting a 435000-ton global shortfall in the refined metal this year.
Barclays Capital estimated a shortfall of more than 800000 tons, or almost 4% of forecast output this year.
"There is limited supply of copper, and there is fund money coming to the market pushing it higher. At the same time, the natural short sellers — the miners — are not playing ball," a trader with an international bank in Singapore told Reuters.
Copper jumped to a record in New York yesterday, extending gains after two years of higher prices. Copper for March delivery on the Comex in New York gained as much as 5,1c (1,2%) to $4,498/lb the highest on record for a most-active contract, before trading at $4,497.
The metal, used primarily in electrical applications, surged 33% last year as the global economy recovered from recession.
"We’re expecting the Chinese to come back into the market in early 2011, leading to a rebound in demand and driving a deficit in the global market balance," said Xin Yi Chen, a Singapore-based analyst at Barclays Capital. With Bloomberg and Reuters
