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Copper to peak near US$11,000t fuelled by fundamentals

The price of copper could peak near US$11,000/t in H2 as the market will remain in deficit until at least the end of the year, according to UK-based metals consultancy GFMS' Copper Survey 2011.

The tight physical market will result in new all-time highs by year-end, said Nikos Kavalis, a senior analyst with GFMS and one of the authors of the report.

However, the red metal could suffer a significant correction before then due to ongoing geopolitical tensions in the Middle East and North Africa, and economic uncertainties in the Eurozone. Potential monetary tightening in China will also be a factor. Any correction would not push prices lower than US$8,200/t.

Market fundamentals remain strong and any negative disturbances will likely be short-lived, according to Kavalis.

2010 AT A GLANCE

Global mine output slowed to a growth rate of 0.8% last year, hampered by declining grades and industrial action. Total output was 15.9Mt.

Refined copper output rose by 3.8% to 19.1Mt despite the limited growth in mine production, according to GFMS.

Costs increased 11% last year, mainly on higher input costs and in part on the strength of producing countries' currencies and falling grades.

Global copper consumption grew 11.3%, with total off take at 19.4Mt.

The copper market was in a gross deficit of 286,000t in 2010, compared with a revised surplus of 987,000t in 2009, according to the study.