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G. Chandrashekhar

Mumbai , April 22

SHARP price movements in copper have been a cause of concern in recent weeks with doubts expressed over the sustainability of high prices.

There are apprehensions that copper is losing its grip and prices could crash as demand dries up. China is a major factor driving the copper market.

Expert opinion is that far from losing its grip, copper is set to scale newer peaks. Despite reaching record highs in recent times (over $3,300 a tonne), there is now strong belief that global copper prices have a further upside potential and could scale the second peak in the near term, given the market fundamentals and the role of speculators.

The belief that prices could surge higher in the near term is strengthened by low level of inventories and forced consumer buying, as seasonal demand picks up.

Many consumers who had earlier not anticipated higher pries stand exposed. Importantly, lack of investment in output capacity has played a key role in causing today's imbalance between demand and supply.

An important element in this upward move will be the conviction among speculators that prices have not yet seen the peak, according to Ms Ingrid Sternby, analyst with Barclays Capital.

A realistic price target is $4,000 a tonne for cash copper, Ms Sternby said at a recent World Copper conference.

In the second half of the year, the metal availability is seen improving as the rise in concentrates production feeds through to the refined market and demand conditions are slow. Prices can then be expected to ease back a little.

However, higher production is unlikely to be enough to refill inventories sufficiently by the end of the year and the market is unlikely to sustain a renewed slowdown in output growth next year.

Copper prices are expected to stay close to the $3,000 a tonne level in 2006, the expert opined.

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