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Copper surges to record of $9,447 a tonne
By Jack Farchy

Published: December 29 2010 12:01 | Last updated: December 29 2010 22:32

Copper reached a record high above $9,400 a tonne, resuming its relentless march upwards as the London metals market reopened in bullish spirit after the Christmas break.

The metal, whose widespread use in manufacturing and construction makes it crucial to the global economy, has risen more than 50 per cent since June.

Barclays Capital is predicting that copper will average $9,550 in 2011 while Goldman Sachs has forecast that it will hit $11,000 within 12 months.

On Wednesday, copper for delivery in three months’ time on the London Metal Exchange moved 1 per cent higher to a record $9,447 a tonne, before slipping slightly to $9,410.

The surge in prices is being driven by stunning growth in industrial consumption of copper in China and Europe, while US consumption is bouncing back from the lows of the financial crisis.

At the same time, mine supply is struggling to keep pace with the growth in demand.

Output is falling at older mines and there is little prospect of a significant boost to production from new mines for the next year at least.

In a report on the outlook for the metal next year, Goldman Sachs said: “We expect these drivers will be sufficient to exhaust nearly all exchange inventories over the course of 2011, forcing the market back into a period of demand rationing.”

The prospect of a further rally for copper is attracting investors.

Stephen Briggs, base metals strategist at BNP Paribas in London, said: “Sentiment is so strong for copper. Everybody is bullish – and the argument is pretty persuasive.”

New investment products that would remove physical stocks of metal from the market are helping to stoke the bullish atmosphere.

ETF Securities, a London exchange-traded fund specialist, has launched an ETF on the London Stock Exchange that is backed by physical copper, while JPMorgan and BlackRock have filed plans to do the same in the US.