China seen as cushion for softer copper prices

Prices of copper - the bedrock industrial metal and a benchmark for gauging the strength of the global economy - are likely to soften further in the coming year as production growth is expected to exceed that of consumption.

However, any weakness may be cushioned by steady demand on the mainland.

The price of the benchmark three-month forward contract on the London Metal Exchange may average US$7,078 a tonne this year, 3.7 per cent lower than last year, according to the average estimate of 28 analysts polled by Bloomberg. Prices have fallen 16.7 per cent in the previous two years amid global economic weakness.

"The general feeling in the market is for copper to go slightly lower this year due to rising production," Jeremy East, Standard Chartered Bank's global head of metals trading, told the South China Morning Post. "Things may not be as bad as the market is thinking ... we may see slowing economic growth in China, but it is still somewhere above 7 per cent. I see China buying more copper this year than last year, and prices will also be supported by the economic recovery in the US and Europe."

The mainland accounts for about 44 per cent of global copper consumption, estimates by British bank Barclays showed. Copper is the most widely used industrial metal, found in products from vehicle parts and electronics to home appliances.

Analysts at Swiss bank UBS said in a research report that mine supplies of copper ore and concentrate are seen rising by "high single digit" percentages this year, which would lead to higher supply of refined copper and could see its price fall to as low as US$6,500 a tonne in the year's first half.

This is despite reports that monopoly power distributor State Grid Corp - China's largest copper consumer - planned to raise its spending on new power grid construction by a larger-than-expected 13 per cent this year.