Copper May Advance to Record on China, Sucden Says (Update1)
March 11, 2010, 2:23 AM EST(Adds Sucden’s LME membership in fifth paragraph.)
March 11 (Bloomberg) -- Copper may rise to a record this year, possibly surpassing $9,000 a metric ton, driven by larger- than-expected imports by China and a revival of demand in Europe and the U.S., according to Sucden Financial Ltd.
Chinese demand will be “positive” for the metal used in construction and the country may import an average of 200,000 metric tons a month, said Jeremy Goldwyn, who oversees business development in Asia for London-based Sucden. The West may be a “net positive” for copper, Goldwyn said in an interview.
Copper peaked at $8,940 a ton in July 2008, two months before the collapse of Lehman Brothers Holdings Inc. helped to push the global economy into recession. Stimulus spending by China, the largest metal user, helped to more than double prices last year and a further rally would bolster producers’ profits.
“Underneath any other factors, China needs copper,” Goldwyn said today from Shenzhen, Guangdong. “Any commodity that China is short of is a good investment in the long term,” said Goldwyn, who’s worked in the industry for 25 years and correctly forecast in 2007 that the price would gain to a record.
Three-month copper futures on the London Metal Exchange, where Sucden is one of 12 floor brokers, traded today at $7,408 a ton at 1:30 p.m. Singapore time after losing 0.4 percent on speculation that China may boost interest rates to contain inflation. Goldwyn’s forecast suggests a possible gain of more than $1,500 this year.
‘Super Bubble’
“We don’t agree with a bullish case for copper this year, and we actually believe there’s a super bubble in the metal,” said Hu Kaixi, a trading manager at China International Futures (Shanghai) Co. Consumption from the power industry is expected to slow and investment demand may also retreat, Hu said.
China’s copper imports increased 10 percent to 322,282 tons in February compared with the previous month, according to the customs office yesterday. Industrial output rose 20.7 percent in the first two months of 2010, the most in more than five years, according to the National Bureau of Statistics today.
Macquarie Group Ltd. said in a February report that copper may rise to $8,000 a ton, citing “strong demand” from China and forecasting a decline in stockpiles held in warehouses monitored by the London Metal Exchange. Morgan Stanley said in January that industrial metals prices may gain as the global economy improved and industrial production gained.
Goldwyn’s import forecast is more bullish than those from Xi’an Maike Metal International Group and China Minmetals Nonferrous Metals Co., which have said refined shipments may halve this year to 1.5 million to 1.6 million tons as the government cuts stimulus spending. Still, his call is similar to forecasts from CBI China Co. and CRU Group Ltd.
“A lot of Chinese traders have bought a lot less tonnage this year on their term contracts” because of a higher premium charged by suppliers such as Codelco, said Goldwyn, 50, referring to the world’s largest supplier from Chile. “But they still may need to buy more on the spot market.”
--Li Xiaowei. Editors: Jake Lloyd-Smith, Aaron Sheldrick
To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net
