Copper price forecasts

"Copper prices expected to fall over next four years" (Source: Mineweb)

Copper prices will fall over the next four years due to weaker demand from the construction and electronics markets in the U.S., according to a Fortis Bank analyst.

Author: James Macharia
Posted: Tuesday , 05 Feb 2008

CAPE TOWN (Reuters) -

Copper prices will soften over the next four years due to weaker construction and electronic goods demand from the U.S. as a recession looms, and a cutback in demand from China, a Fortis Bank analyst said on Monday.

The copper price is expected to trade between $4,500 to $6,500 per tonne between 2008 and 2012, Robin Baskin of the metal marketing department at Fortis said.

The reduced prices would, however, be much higher than the $1,500 a tonne price for copper seen in 2001. Since then, copper prices have shot up as China's economy grew and speculative investors pumped money into the base metal, Baskin said.

During the leaner four-year period ahead, copper prices would be weakest in 2008 and 2009, and recover thereafter buoyed by China, she told the Mining Indaba, a global mining conference in Cape being held in Town this week.

"The next two years will be tougher on copper than the last two years. With the U.S. going into a recession, there will be a slowdown in demand from the housing, construction and electronics sectors," Baskin said.

"China is not immune to external factors," she added, citing a slowing United States economy as affecting exports from resource-hungry China.

Mounting U.S. economic problems, including high energy costs, have prompted analysts to predict the country is headed into a recession. The U.S. Federal Reserve cut interest rates aggressively again last week, trying to stoke the economy, and politicians are scrambling to enact a stimulus package worth around $150 billion to ward off the economic downturn.

Analysts say record mortgage foreclosures, a steep drop-off in residential construction and financial market turmoil have economists warning growth has stalled or begun to contract.

"Base metals tend to fall in recessions," Baskin said.

Copper prices firmed on Monday on signs of stronger demand and as the market fretted about supply disruptions in China.

Copper for delivery in three months on the London Metal Exchange traded at $7,290 a tonne in official rings, from $7,250 on Friday, when the metal used widely in the power and construction industries hit a two-week high of $7,389.

China's own plans to curb inflation in order to prevent its economy from over-heating, would also hurt copper prices in the near-term, but this decline in growth would be muted.

Baskin said China's role as a major buyer of the commodity -- the most important source of new copper demand than the U.S. -- would stave off a bruising decline of copper prices, and cause a rebound as from 2010 to 2012.

"China, which is particularly copper-friendly will continue to grow, but slower," Baskin said.

"China is a bigger factor now more than the U.S. in supporting copper prices."

Supply for copper would grow in 2008, but would face labour strikes, safety and technology handicaps, she said.
(Editing by Michael Roddy)