Chinese buying revitalizes copper price

In the past few weeks, as some glimmers of economic recovery have filtered into the markets, the price of copper has taken a noticeable move to the upside -- it is up about 30% in the last two months, closing at US$1.87 a pound yesterday.

Copper is the flagship base metal, and is often called "Dr. Copper" because of its ability to forecast the state of the economy in general and the metal markets in particular. But none of the other base metals have followed copper's recent rally, and industry experts do not expect that it will have very long legs.

Put simply, copper is up because the Chinese are loading up on strategic reserves as they begin to spend billions on infrastructure projects. Reports suggest that China alone has bought about 300,000 tonnes in recent weeks, and the result is the first notable decline in inventories on the London Metals Exchange since last summer.

Augmenting that is a growing realization that China cannot just go and buy all the copper assets it wants. Last week, the Australian government blocked the Chinese purchase of the Prominent Hill mine for national security reasons.

Copper is also getting increased interest as an inflation hedge.

But none of this has much to do with the fundamental demand picture. Orest Wowkodaw, an analyst at Canaccord Adams, said in an interview that he has not seen "any real evidence" of a recovery on the demand side. Canaccord has downgraded some of the rallying copper stocks recently for that reason.

When demand returns, there is hope that the move upward could be dramatic. Copper inventories are still paper-thin compared to other base metals. And mine supply will have trouble keeping up with demand now that the scrap processing market is almost gone.

And as for the other base metals, industry experts see little hope for a significant short-term rally. Zinc, aluminum and nickel are still in over-supply situations, and many of the mines and smelters that are still running are losing money.

Copyright and Exemption Declaration :¢ÙAll articles, pictures and videos that are marked with "China Aluminum Network" on this website are copyright and belong to China Aluminium Network (www.alu.com.cn). When transshipment, any media, website or individual must list the source from "China Aluminium Network (www.alu.com.cn)". We seek legal actions against anyone that disobey this. ¢ÚArticles that marked as copy from others are for transferring more information to readers, do not represent or endorse their opinions or accuracy and reliability. When other media, website or individuals copy from our website, must keep the source. Anyone that changes the articles' sources will hold the responsibilities for copyright and law problems. We also seek legal actions against anyone that disobey this. ¢ÛIf any articles copied by our website concern the copyright and other problems, please contact us within one week.