Copper entering a bull phase

[] — THE AVERAGE copper price in 2009 will receive a boost from an expected strong performance in the final quarter of the year, said metals research group GFMS, which says it is bullish for the metal’s prospects over the next three years.

GFMS previously forecast a full-year average copper price of $4,500/tonne, but with expectations of prices topping $6,500 in the fourth quarter of 2009, GFMS revised its annual estimate to $4,900.

“Copper has raised the bar in the recent base metal sector rally. We were taken a little bit by surprise by the extent of the rally,’ said GFMS Metals Consulting managing director Neil Buxton.

Copper is currently trading above $6,100. Copper prices more than doubled from a low of $3,051 in January to a high of $6,419 in early-August.

GFMS lowered its 2009 surplus production estimate to 245,000 tonnes from its earlier estimate of 441,000 tonnes.

Demand is expected to strengthen significantly in 2010 and GFMS forecast an 88,000 tonne deficit in 2010 and larger shortfalls in 2011 and 2012 of 121,000 tonnes and 176,000 tonnes respectively.

Buxton said a strong recovery in consumption and slower mine production will drive copper prices up over the next three years.

“We remain fairly bullish about copper’s prospects for the next three years with the lack of new mine supply coming through,’ Buxton said.

GFMS forecasts that copper prices will top $7,500 in 2010 with an average price of $6,500 for that year, with prices rising each year to end-2012.

“Copper stood out even in the previous bull markets. It is essentially supply driven, not demand driven, and this is still the case,’ Buxton said.

GFMS expects some profit-taking by investors to drive copper prices down in the short-term. “There is some investor interest in copper, but copper will continue to be driven by supply fundamentals. It is not considered a currency like gold is,’ Buxton said.

Unreported inventories from China may also begin to weigh on the local market, triggering a fall in Chinese copper imports and subsequent rise in copper stocks. However, this trend is considered to be short-lived.