Copper May Climb on Speculation Demand Will Outstrip Supply, Survey Shows

Wednesday, Jul 28, 2010

Copper may rise on speculation that demand will maintain its pace as output from mines drops at leading producers, a survey showed.

Nine of 15 analysts, investors and traders surveyed by Bloomberg, or 60 percent, said the metal will gain next week. Six predicted lower prices. Copper for delivery in three months was 8.1 percent higher for this week at $7,010 a metric ton on the London Metal Exchange at 5 p.m. yesterday.

Freeport-McMoRan Copper & Gold Inc., the world’s largest publicly traded copper miner, said this week second-quarter mined copper output slid 13 percent from a year earlier. Also this week, BHP Billiton Ltd., the third-biggest producer, said output of the metal from mines slid 5 percent from the prior year in the three months through June.

“Growing evidence that there isn’t enough copper being produced” will aid prices next week, David Thurtell, a Citigroup Inc. analyst in London, said by telephone. He also pointed to “the China story about more stimulus in the second half and data showing that Europe appears to have come out of its sovereign-debt crisis relatively unscathed.”

Chinese stocks posted the longest winning streak since February this week on speculation the government may relax curbs on property and lending. In Europe, a composite index based on a survey of euro-area services and manufacturing purchasing managers rose to a higher-than-expected 56.7 from 56 in June, Markit Economics said yesterday.

The red bars on the attached chart are derived by subtracting bearish forecasts from bullish estimates, with readings below zero signaling the majority of respondents expect a decline. The green line shows the copper price. The survey data shown are as of July 16.

The weekly copper survey has forecast prices accurately in 46 of the past 96 weeks, or 48 percent of the time.

Source: Bloomberg