RIO DE JANEIRO, Mar 16, 2011 (Dow Jones Commodities News via Comtex) -- Brazilian demand for copper may grow 11% in 2011 and even more in 2012 as the country invests in infrastructure to prepare for the 2014 World Cup and 2016 Olympic Games, and as its construction, oil, mining and car industries grow apace, said Sergio Aredes, president of Brazilian copper products producers' association Sindicel.

Most of that growth will be met by imports from Chile and Peru, as Brazil's strong real and high costs provide little incentive for expanding the local copper smelting capacity, Aredes said in an interview Wednesday. A flood of copper products from the U.S. and China contributed to boost imports 56% in value terms to $944 million last year, according to Sindicel.

Brazilians used some 360,000 metric tons of copper in 2010, a jump from the 300,000 tons consumed in 2009, when the market sank amid the economic crisis, Aredes said. However, only in 2011, with expected usage of 400,000 tons, will consumption exceed the pre-crisis level of 380,000 tons in 2008, he said.

"Copper market growth reflects Brazilian industrial growth," Aredes said. "The sector is growing hand-in-hand with infrastructure growth.

Brazil has only one primary copper producer, Caraiba Metais SA, which produces around 200,000 tons a year at present, and market growth is being supplied by imports."

"It makes more commercial sense to import [copper] cathodes than to invest in more refining capacity," he said.

Copper is used widely in wires and cables in basic industries.

Despite rising local costs, Caraiba Metais, part of the Paranapanema SA (PMAM3.BR) base metals group, last month announced it will finally proceed with a long-planned expansion of its copper smelter to 280,000 tons from the current 230,000 tons a year in a 630 million Brazilian reais ($379.51 million) investment, to tap more of the booming domestic market.

The expansion may be completed only in two years' time, due to long delays in receiving equipment, the Sindicel president said. No other major investments are foreseen in the copper-processing sector for the next two years, despite burgeoning demand, he said.

Brazilian miner Vale SA (VALE, VALE5.BR), which is expanding copper mine production with the planned opening of a major new mine, Salobo, in the Amazon, later this year, is unlikely to set up copper smelter facilities in Brazil, according to Aredes. Profit margins are higher on ore or concentrates sales than on metal sales and copper is easily imported from nearby Chile and Peru, he said.

Vale's press office in Rio de Janeiro had no immediate comment on the possibility of setting up smelting installations.

According to Paranapanema's Chief Executive Officer Luiz Ferraz, Brazil imported as much as 270,000 tons of copper in 2010 to fulfill domestic demand. Part of Paranapanema group's local production was sold on the export market.

Copper scrap, of which around 100,000 tons a year circulates on the Brazilian market, meanwhile, supplies part of the local demand, according to Sindicel.

World copper prices will continue to rise this year, mainly due to speculation by traders and hedge funds, which see metals as an attractive investment, the Sindicel president said.

London Metal Exchange cash prices for copper averaged $5,150 a ton in 2009, rising to $7,500 in 2010. A further rise to an average price of $9,500 a ton is foreseen for this year, according to Sindicel.

"What other investment gives a return of 50% a year?" Aredes asked.

The current problems in Japan as a result of the earthquake will meanwhile push demand higher and may cause more speculation, he said.

"In the first instance the Japanese problem is negative for the copper market as [Japanese] companies may stop buying. In the longer term it may be positive as demand will grow for copper to be used in reconstruction," Aredes said.