Standard Charted Global Research latest assessment (click on graphs for clarity):
Prices have tumbled in the past few weeks, reaching a four-year low of USD 3,500/t before recovering slightly. Demand has weakened at an alarming rate. According to CRU, a metals consultancy, orders received by copper consumers fell by up to 50% in October and spot buying is reported to have ground to a halt. Demand also remains weak in China, with apparent consumption down 5% y/y in October and up just 2.2% in the fi rst 10 months. This demand weakness was partly driven by fundamental problems in the global economy, but falling copper prices and the credit crunch have also encouraged a rapid rundown in off-warrant stocks. Producers have therefore been forced to deliver to the LME as a buyer of last resort. LME stocks rose by 35% m/m in late November to 286 thousand tonnes (kt).
Over the next few months we expect copper prices to remain under significant downward pressure, and we see this as the market most likely to fall in the short term. Inventories are building, albeit from a low base, the majority of producers are still in the black, and prices remain elevated relative to historical levels. Looking further ahead into the second half of 2009, we expect to see a significant recovery in prices. The supply side for copper is expected to remain relatively tight due to falling grades and ongoing problems at a number of major mines. We also anticipate that demand will turn around before high inventories become a problem. On this assumption, copper should become one of the best-performing base metals in late 2009.