Copper to Outperform in 2010 on Stimulus Effect
Source: Bloomberg, Sungwoo Park (11/6/09)
"…current price levels fueled by increased liquidity cannot be sustainable without support from actual demand"
"Prices of industrial metals will advance next year," Yi Seong Je, a commodities analyst at Tong Yang Securities in Seoul, said yesterday. "Copper will outperform since stimulus spending is focused mostly on infrastructure, which primarily needs the metal."
Copper gained to a one-year high last month on demand from China, the world's biggest metals user, and as the dollar slumped against major currencies. China's government is spending $586 billion to spur the local economy, helping to drive imports to record levels in the first half of 2009.
Yi forecast copper for delivery in three months on the London Metal Exchange may average around $6,500 a ton next year, and top $7,000 a ton by the end of 2010.
Copper on the LME has averaged $4,907 a ton this year, according to Bloomberg data. The metal gained 0.5% to $6,562 a ton at 10:06 a.m. Seoul time.
"What I am closely looking at now is demand-related indicators because current price levels fueled by increased liquidity cannot be sustainable without support from actual demand," Yi said. "The key is by how much demand in major consuming nations apart from China will recover."