Copper to lead base metals rally

Written by Bloomberg | Updated: Mar 30 2011, 05:58am hrs
Copper will lead a rally in base metals this year as increased consumption in China reduces inventories and higher prices encourage stockpiling, according to researcher Brook Hunt, a Wood Mackenzie company.

Fundamentally, the markets tight, Julian Kettle, head of metals research, said in an interview in Singapore, predicting that cash copper may average $9,700 per tonne this year compared with $7,543 in 2010. Kettle also backed nickel and lead.

Copper, which reached a record last month, is expected to have a 5,70,000-tonne shortfall this year as Chinas demand grows 6%, according to Brook Hunt. The metal surged 30% last year as the global economy recovered from the recession. The International Copper Study Group is predicting a 4,35,000-tonne deficit this year.

Therell be a shortage of copper, said Kettle, a metallurgist whos been at Guildford, England-based Brook Hunt for more than two decades. In the short term, the market is going to remain tight and fundamentally its strong.

Three-month copper on the London Metal Exchange, which reached an all-time high of $10,190 on February 15, traded on Tuesday at $9,495.75, down 1.1% this year. Lead futures traded at $2,630 per tonne, up 3.1% in 2011. Nickel has advanced 5.5% this year and was at $26,100 per tonne.

Brook Hunt joins Barclays Capital and Rio Tinto Group in forecasting a copper shortfall as mining companies fail to keep pace with demand. Therell be a global deficit until 2014, Standard Chartered Plcs Michael Haigh said last November, predicting that the metal will perform incredibly well.

China, the worlds largest copper user, is aiming for annual economic growth of 7% in the period to 2015, down from the previous 7.5%, according to the nations latest five-year plan, which sets development goals.

The five-year plans just come out, lots of positive things in there but a slight shift, said Michael Sinden, head of metals markets at Brook Hunt. Its going to be a slower pace but still the volume is there.

China will build 36 million units of social housing, or affordable homes, over the five years, the National Development and Reform Committee said on March 6. Vehicle sales will grow 10% to 15% this year after jumping 32% to 18.06 million vehicles in 2010.