Copper May Be the New Gold in 2011


"Studies suggest that copper will be in a 450K-ton deficit in 2011."

Copper is the most talked about commodity this year. In 2010, copper has outperformed other base metals and given returns of 30% with copper prices touching an all-time high in first quarter of 2011. While gold maintained its safe haven appeal, copper has seen industrial demand rise.

In 2011, copper prices are to be driven by strong fundamental factors like tight supply situation and increasing demand. Supply will play a key role in shaping copper's price this year, after a 30% decline in stockpiles last year—the most since 2004—and an anticipated shortfall once again in 2011. Refined copper production is set to rise but just at 1.12% lesser than the rise in demand of 4.50%. It is estimated that in 2011, the copper demand will surge around 4.50% backed on strong demand from China, India and also growth in the U.S. International Copper Study Group has estimated global copper market will be in deficit of 4,50,000 ton in 2011.

Many leading mines across the globe that were developed over two decades ago are yielding ore with less and less metal content. Production at Escondida, the world's largest copper mine, is anticipated to drop as much as 10 % in the next 12 months because of lower grades.

Due to shortage of domestic mines and a low percentage of productivity in the existing mines, India is already suffering loss in the level of production for copper. Rising prices are attracting companies to start newer ventures, but copper projects take a long time to commence. Hence, no new major copper supply will be seen in 2011, further tightening the inventory situation.

In addition, India and China's copper imports are expected to go up this year and demand is also likely to rise by 7% in 2011 from last year.

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