Copper stocks low despite Chinese holiday

A recent fall in copper stocks has presented something of a conundrum to observers as demand from China has lessened because of the Lunar New Year holiday.

Demand from Japan has also bee suppressed by a public holiday.

The decline in stocks has seen the price of copper on the London Metal Exchange increase to its highest level since October of last year and analysts are predicting that the price of the metal will rise sharply again, once the Chinese New Year is over and the country returns to full production.

Last year the price of copper increased 40% during the three months from the end of the Chinese New Year and should the performance be repeated in 2008, the metal will be starting from a higher price level than a year ago, when Chinese de-stocking had depressed the price.

In 2007, Bloomsbury predicted that copper would reach $9,000 a tonne within two years, because analysts would be unable to predict periods when supply would be short.

This danger of the copper price soaring from time to time has only been heightened by the delays and financing difficulties that have beset a number of new copper projects.

As with most other industrial metals, a rise in the price of copper will be driven by Chinese growth; whether or not that will be adversely affected by the threat of recession in the US has yet to be established.