Copper Rallies on Growing Supply Concerns

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"Copper has jumped 30% in past 12 months."

Copper futures rallied on mounting concerns that demand will outpace global supplies by as much as 600,000 tons (600 Kt.) in 2011. In New York, copper futures for March delivery rose 0.3%, to $4.427 at 10:44 a.m. on the Comex. Over on the LME, copper for delivery in three months rose $60, or 0.6%, to $9,690 a ton ($4.40/lb.).

Copper has jumped 30% in past 12 months. The red metal reached a record of $4.498/lb. on Jan. 3. The price may average $5.10 this year, up 49% from 2010, Bank of America Merrill Lynch analysts said today in a report. "Copper has the strongest fundamentals among the base metals. The concentrates and scrap markets remain tight, and mine supply will likely constrain refined output in the coming years. We forecast a deficit for 2011," said Merrill Lynch analysts.

According to JP Morgan Securities, the copper deficit will be from 500600 Kt. in 2011. Macquarie said in a research report on Dec. 27 that the shortfall would be 550,000 tons. The International Copper Study Group has predicted a shortage of 435,000 tons. Today, Morgan Stanley today raised its copper and gold forecasts through 2015. The bank wrote in a research report that copper is likely to average $4.45/lb. in 2011, up 24% from an earlier estimate.

Several of Chile's largest private mining companies have opted for the country's new copper royalty structure, Mining Minister Laurence Golborne said Wednesday. The government moved to increase the royalty copper miners were paying to in part finance reconstruction efforts following the 8.8-magnitude quake that ravaged the country in early 2010. Under the new structure, which is voluntary, copper producers could pay a royalty of up to 14%, based on their sales and world copper prices.

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