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Lower Supply, Higher Demand Mean High Prices for Copper

April 1, 2011 at 1:04 by Vladimir Vyun

Copper recovered from the previous losses as economists expect that growth of demand will outpace increase of supply. The economic recovery is gaining momentum and demand for industrial metals grows. Lower demand from Japan after the disastrous earthquake and the tightening in China still can hurt the metal.

The International Copper Study Group estimated that the global consumption will rise 4.5 percent to 19.7 million metric tons this year. At the same time, the output will increase only 1.1 percent to about 19.3 million tons. That means a deficit of 435,000 tons.

Yingxi Yu, a commodities analyst at Barclays Capital, said:

We’re still positive on the economic recovery. We don’t think the events in the Middle East and Japan will derail the global economic recovery so anything that’s leveraged to economic recovery will still be relatively attractive.

Contract for delivery of copper in three months advanced 0.7 percent to $9,450 per metric ton on LME. The metal gained 0.6 percent to $4.2985 per pound on COMEX. Copper traded at $9,435 in Singapore, while it fell 1.5 percent to 70,230 yuan ($10,721) per ton on Shanghai Futures Exchange.

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