Copper forecast turns upward

GFMS says that increases in copper prices will be driven by supply fundamentals rather than investor speculation

Frank Holmes, U.S. Global Investors | 26-08-09 | E-mail Article

The global market for copper will get a lot stronger starting in the fourth quarter of 2009 and continue into 2012, according to the metals consultancy GFMS.

London-based GFMS predicts that the price of the orange metal will rise above $6,500 per metric ton in the final three months of this year, and will average about $4,900 per metric ton for all of 2009. Copper is currently in the $6,100 range--more than double its price in January.

GFMS says unexpectedly strong demand for copper in the fourth quarter should slash the 2009 production surplus to 245,000 metric tons, well down from its previous forecast of 441,000 metric tons.

The supply-demand balance swings even more starting in 2010--an 88,000 metric ton deficit that is estimated to double to 176,000 metric tons by 2012. Next year's price is estimated to peak at more than $7,500 per metric ton on its way to averaging $6,500.

GFMS says revived economic growth around the world and production constraints will contribute to the shortfalls, and that the copper price will be driven by supply fundamentals rather than investor speculation.

Frank Holmes is CEO of US Global Investors, Inc., a boutique investment advisory firm based in the United States that manages domestic and offshore funds specialising in the natural resources and emerging markets sectors.

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