[Cu] Whether or Not Copper Price Can Continue to Rebound in 2H 2009

SHANGHAI, July 15 (CBI China) -- Bulk commodity prices experienced a round of strong improvements during 1H, propelled by the economic recovery and expectations on inflation, while copper price has reached USD 5,390/mt in June, up 91% compared to the lowest level of USD 2,825/mt during 4Q 2008.

    China's State Reserve Bureau has purchased 235kt of copper as national reserves; scrap copper supply was tight due to economic crisis and sluggish copper price, contributing to the tightness of structural supply in China’s copper market, which triggered significant increases in China’s imports of refined copper. According to China Customs, imports of refined copper were 1.4035 million mt from January to May 2009, up 129.68% YoY, and apparent consumption of refined copper was 3.0053 million mt from January to May, up 44.45% YoY.

    Marked increases in copper price during 1H has been divorced from market fundamentals to some extent. Copper price will face downward pressure, if actual demand reports no significant improvement; meanwhile, if bulk commodity prices continue to remain inflated high, the global economy will likely experience inflation in the near future.

    Copper market entered the seasonal low consumption period from 3Q, so the marked increases in imports of refined copper in 1H will test the market consuming capacity. Most of market insiders believe 80-100kt of imported copper was piled up in bonded warehouse, due mainly to falling SHFE/LME copper price ratio, which also added downward pressure to copper price. In this context, CBI believes copper price will likely fluctuate lower during 3Q and should find strong support in the USD 4,200-4,500/mt range. However, the economic recovery and the sufficient capital liquidity in the market will help restrict the downward room for copper price. Hence, copper price will move up again during 4Q with the recovery of consumption.

Copyright © 2009, CBI (Shanghai) Co., Ltd. All Rights Reserved.

None of this material may be used for any commercial or public use in any form or means, without the prior written consent of CBI China. For reproduction issue, please contact us by email: metalresearch@cbichina.com or tel:86-21-51550040