Copper prices have moved in a range between $8,000 and $8,800 a tonne since February, following a rally in December and January.
Jitters over Europe have been offset by concern over supply: "the bigger copper miners are struggling to increase their capacity", says Andrew McLeod of Lime Street Capital. Moreover, many analysts are expecting the economy in China, the biggest consumer of copper, to pick up in the second half of the year. But the market "appears complacent", argues Capital Economics.
In both China and Europe, the metal's biggest consumers, manufacturing is shrinking. That normally implies falling copper prices, yet in recent months copper has become more pricey. Moreover, Chinese copper inventories are at record levels, so even if the government is successful in spurring an economic rebound later this year, China's copper demand and imports are unlikely to climb significantly.
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Meanwhile, the property and railway sectors, both of which are highly copper-intensive, are both cooling. On top of that, on the supply side, mine production now looks likely to rebound with growth of 4.5% expected for this year, up from a 1% average since 2004.
Throw in a worsening eurozone recession and crisis and prices should fall, says Capital Economics. Expect the red metal to cost around $6,000 per tonne by the end of the year.
