Copper Could Hit $12K by the End of June

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"Copper will likely to rise to $12,500/ton by the end of Q211."

Copper could climb above $12,000/ton by the end of June as the market factors in a supply shortage, according to Peter Fertig of Quantitative Commodity Research. Fertig forecast $7,525/ton for the average cash copper price for last year on the LME. Cash prices of the metal used in power and construction averaged $7,543/ton last year.

"The most likely scenario is for copper to rise to $12,500 a ton, or slightly above by the end of the second quarter. Otherwise it could happen in the fourth quarter after the seasonal summer lull," he said.

"Copper is likely to remain in a supply deficit this year, last year it was in deficit, too. . .Furthermore with the launch of the ETPs (physical base metal exchange traded products), there will be less copper available for consumers."

The launch of physical copper, tin and nickel ETPs in December triggered a debate about the advantages and disadvantages for investors, consumers and producers.

Analysts expect the copper market—currently estimated at about 19 Mt.—to see a small deficit last year and a bigger shortfall in 2011.

Benchmark copper prices on the LME gained about 30% last year and were up more than 140% in 2009.

Fertig expects lower-grade copper ore to add to supply shortages, which have been exacerbated by output disruptions and shelving of projects after Q408 when the world feared a 1930s-style depression.

"With a still growing global economy, demand for copper is likely to increase and outpace rises in supply," he said, adding that he expects copper stocks to decline further.

"With a supply deficit, you normally also have falling inventories." Stocks of copper in LME warehouses have risen about 30,000 tons since December 9 to 379,250t, but that number is more than 30% below the levels seen in February 2010.

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