From the February 01, 2010 issue of Futures Magazine • Subscribe!

Copper: All eyes on China

For copper, all eyes are on China and other emerging economies that are showing stronger signs of recovery than the West. Copper climbed higher for all of 2009, and analysts say it could continue to go higher, though it currently looks to be in the midst of an overbought correction. Copper went from $1.25 per lb at the end of 2008 to more than $3.50 in early 2010.

“No matter what, [copper] keeps climbing. Most people believe the recovery is more imminent,” says George Gero, vice president of global futures at RBC Wealth Management. He says that the increase of reserve requirements by 50 basis points in China, signaling a tightening monetary policy, could have been a setback for copper, but was not because the Chinese had already purchased copper. “It’s not going to affect their interest in copper [or that of] Brazil, India, and the United States,” he says.

Catherine Virga, an analyst at CPM Group, doesn’t see demand in China slowing down either, but says demand outside of China could be a concern. “Supply disruptions are behind us and now we’re going to be focusing on demand fundamentals.”

Gero doesn’t have a price prediction for copper, but sees prices continuing to move up. “I don’t expect copper to sell off much,” he says.

Virga agrees. “The correction [will be] short-lived. We’re forecasting a very small surplus this year and that’s going to be supportive of prices,”
she says.

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