World Copper Prices JUMP to $2.70/LB!

Analysts see signs of higher demand, prices ahead according to Tom Stundza -- Purchasing, 8/5/2009 3:06:33 PM EDT

Copper, being one of the best barometers of economic activity, makes its price an excellent way to gauge the pending recovery in the global economy, suggests metals analyst Michael Gambardella of J.P. Morgan Securities in New York.

At $2.70/lb this week on the London Metal Exchange on Tuesday, spot copper cathode is at the highest level of 2009 and the highest since $3.17 last September. The year-to-date LME average is $1.91 but has boosted the 2010 copper price average forecast to $2.17/lb.

Copper is used in power and construction and the early-August price, up from the $2.36 average in July got a boost from news that pending sales of previously owned U.S. homes rose at a faster-than-expected pace in June. The housing data followed positive manufacturing data from around the world that bolstered the view that the global economy was pulling out of a steep downturn.

"Everything seems to be in place for continued strength" analyst Joel Crane at Deutsche Bank tells Reuters, noting there is growing sentiment in equity and commodity markets that the economy is improving faster than originally thought." That's why most forecasters now say there will be growth in gross domestic product in July-September after declining in five of the past six quarters.

Meanwhile, Goldman Sachs suggests to clients in a recent note that copper supply constraints at a time of improved demand this half could mean "that risks to our copper price forecasts are skewed to the upside." The brokerage's 2009 copper price forecast is $2.18, moving to $2.63 in 2010.

Chinese imports of unwrought copper rose to 475,999 metric tons in June from 422,666 metric tons in May, a 12.6% month-over-month growth. So, analyst Jim Lennon at Macquarie Bank in London says "apparent copper demand in the first half was probably up 55-60% year-over-year, suggesting stock building of 400,000-500,000 metric tons, so there remains a widespread expectation of a future slowdown in import demand."