Chinese buying drives copper to record

Chinese buying has driven the price of copper to a record high of nearly $9,000 a tonne and traders warned that prices could rise a further 25 per cent next year to more than $11,000 as demand continues to outpace supply.

The red metal is a crucial cog in the global economy as its use in electronics and construction means it is found in almost every appliance and building.

The record price at the London Metal Exchange of $8,966 a tonne on Thursday makes copper the first major commodity to surpass its 2008 peak.

Before the start of the commodities boom in 2004, copper traded at less than $2,000 a tonne.

The sharp rise – the metal’s price is up almost 50 per cent since June – will deliver barnstorming profits to some of the world’s largest mining companies, including Freeport McMoran of the US, BHP Billiton, Xstrata and Rio Tinto, as well as the Chilean government, which owns Codelco, the world’s biggest copper miner.

“It’s extraordinary,” said Gavin Prentice, managing director of Marex Financial, a brokerage. “But I think it has a lot further to go,” he added, echoing a widely held view on the market. Senior copper traders say the price could rise to $11,000-$12,000 a tonne next year as already tight inventories are drawn down further.

Chinese buyers – who account for 40 per cent of global copper demand – have been largely absent from the market since September, put off by nearly record prices.

But traders said they had returned over the past 48-72 hours, pushing up prices in Shanghai. The pick-up in local prices made importing copper into China profitable, hence pushing up global benchmark prices in London, they said.

Yang Liang, a copper trader at Minmetals, the Chinese state-owned metals trading company, said the market was “very hot”。

He added consumers could return again to the market early next year. “Demand in China is growing in a very stable way.”

On Thursday China reported that its consumer price inflation had jumped to a two-year high of 4.4 per cent in October from 3.6 per cent the previous month, while industrial production and retail sales were also strong.

Analysts expect demand to outstrip supply by more than 400,000 tonnes next year, and stocks of the metal have been drawn down as mine supply disappoints. A strike at Collahuasi, the world’s third largest copper mine, has raised concerns of further losses to output.