Copper prices unlikely to exceed $9,000 - De Wet

COPPER prices in 2012 are not likely to exceed US$9,000 per tonne due to the decline in the Chinese construction sector, says Standard Bank head of commodity strategy Walter de Wet.

And de Wet stated that global copper consumption is expected to grow by 1.2 per cent in 2012 to reach 20.3 million metric tonnes.

In a statement yesterday, de Wet stated that for most investors, copper was a base metal of choice and its price provides insights into how traders viewed the global economic outlook.

"But to analyse the global copper demand, outlook for the Chinese market, the largest global consumer, needs to be considered in detail. After stabilising over the second half of 2010 and into the first half of 2011, Chinese property sales growth started to deteriorate again in September 2011," de Wet stated.

"We expect sales growth to decline further during the first half of 2012. Most of the growth in construction to date has come from the private sector, with government related property development making up only a small percentage of total developments, so this declining health of the Chinese construction sector poses a real risk to demand and prices are unlikely to be much above US$9,000 per metric tonne for 2012."

He explained that construction currently accounts for 55 per cent of China's total copper demand with domestic consumption accounting for around 29 per cent while exports account for 16 per cent of total demand.

"Exports are perceived to be the primary risk to Chinese copper consumption but this sector constitutes only a modest percentage of total demand. For demand to remain at current levels, domestic consumption would need to fill the gap," stated de Wet.

"Despite macroeconomic unrest in the West, the US and Europe are still key players in the global copper market."