Why China is the key to the future of copper in 2013

Dec 31, 2012 | 07:00 PM | Samuel Frizell

Tags  copper, China copper, China, London Metal Exchange, Patrice Mohr, Scotiabank, BNP Paribas SA, Samuel Frizell

As analysts’ enthusiasm for the copper market begins to fade, observers are looking at the two factors that likely will have the largest impact on copper in 2013: Chinese consumption and global mine startups.

“The U.S. is going to bumble along,” a Britain-based trader said of the global economic outlook. “The key continues to be China and how rapid their consumption will be.”

Copper prices on the London Metal Exchange slipped from an average of around $8,810 per tonne in 2011 to a little more than $7,960 per tonne in December, a drop that had much to do with activity in China.

Chinese markets account for more than 40 percent of global copper consumption, according to Patricia Mohr, vice president and commodity market specialist at Toronto-based Scotiabank, and demand from warehouses in Shanghai can swing global prices. The International Copper Study Group expected global copper use to rise 2.6 percent in 2012; without Chinese consumption, it would have predicted a 1-percent decline.

“An awful lot of what inventory is around for refined copper is being held in China,” Mohr said. “If you look at exchange stocks on LME as a total, those stocks have actually declined (in 2012) despite the fact that they’ve increased on the Shanghai Futures Exchange.”....