Commodities set for new highs in 2024 Dec 2010 11:57
http://www.iii.co.uk/articles/13680/commodities-set-new-highs-2011
Copper
Base metals were the true success story of 2010, particularly copper as robust demand from top consumers such as China and improved demand from developed nations continued to drive prices up.
The metal hit a high of $9,267.50 an ounce earlier this month amid a weak dollar and strong Chinese data which revealed that copper imports had risen by 29% in October and were up 0.7% in the first eleven months of the year.
If copper closes around $9,200 this year, it will have notched up an remarkable 35% gain in just six months and will mark the second year in a row that copper has mapped impressive gains.
While gold has appealed to those seeking a hedge against inflation, copper has seen demand for its industrial use rise.
John Meyer, analyst at Fairfax, commented: "Copper is now being bought for investment and strategic purposes and prices now indicate significant potential for further strength into the New Year.
"Expectations for rising industrial demand next year are forecast to push the market back into deficit."
Supply will play a key role in shaping copper's price next year, after a 30% decline in stockpiles this year - the most since 2004 - and an anticipated shortfall once again in 2011.
BMO Capital Markets forecasts next year's deficit to be around 380,000 tonnes, while Standard Bank predicts a gap of 385,000 tonnes as mining companies struggle to ramp up output fast enough to keep pace with growing demand which is set to grow some 6.4% in 2011 - its biggest gain since 2007.
Societe Generale said: "A combination of slow mine supply growth, visible stock drawdowns and the potential for newly launched ETFs to divert metal away from consumption is likely to push copper prices significantly higher."
Despite the Financial Services Authority receiving a complaint about ETFs, a wave of new investment vehicles has been launched as investors seek to clamour aboard the copper train.
Earlier this month, ETF Securities unveiled ETFs in copper, nickel and tin arguing that they offer investors "new access to the market," while JPMorgan and BlackRock are also racing to compete.
The combination of factors prompted Goldman Sachs to believe prices will bob above the $11,000 tonne mark, with prices really finding their feet in late 2011, while Bank of America Merrill Lynch forecasted an average $11,250 per tonne next year.
In a note, Morgan Stanley recently said: "Although prices are currently trading close to their all-time high, strong demand trends, low inventory and ongoing supply constraints have reinforced our conviction that copper fundamentals remain the strongest in the base-metal complex."
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