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Copper prices likely to rise further due to supply deficit


Market sources have said that manufacturers of wire rods and cables believe that they shall not get any relief following continuity in increase in copper prices, due to the fact that supply of copper is very tight across the globe in general. Its demand is likely to exceed supply by significant values within the next year especially when massive reconstruction activities are proceeding in Japan and several infrastructure projects are progressing in developing countries like India.

The Portugal based International Copper Study Group has said that the growth in copper demand in the world is likely to exceed global output within this year. While annual deficit was previously projected around 253,000 tonnes of refined copper during 2010, it is likely to jump further by 378,000 tonnes this year. Availability of the commodity is going to widen by 279,000 tonnes in 2012. Approximately 35% of the copper produced in the world is utilized by wire and cable industries. Most of the experts believe that the consumption patterns of these industries besides the future growth trend for the metal.

Another ICSG study reveals that following the recent trends in copper pricing and increasing end-user demand, output of the commodity shall jump for the first time to significant levels since the economy crisis of 2008. This activity shall be further strengthened by new mining operations being set by companies. For the current year, industrial demand from major consumption sectors is set to rise just like it did in the last year and may as well exceed the growth in refined production.

It should be noted that in the wake of recent high rate of growth, Chinese copper consumption surged just 4.3% last year contributing more than 38% towards global demand. This year, the growth is likely to be around 6% mark. A projected growth in semi fabricate output and a possible wave of restocking of working inventories would be partly offset by the ever increasing reliance on direct melted scrap and potential drawdown of unreported stocks that were built up in preceding years.

Many elements like the recent devastating earthquake and tsunami in Japan , political turmoil in West Asia and North Africa, alterations in trade and monetary policies, and uncertainty in copper market of China dominated Asian region give birth to ambiguity and may further deepen the supply deficit.

Experts have said that Japan shall initiate several reconstruction and infrastructure enhancement projects in the earthquake affected areas over the coming 3 months and thus driving copper demand higher and higher.

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