Copper prices rallied to an all-time high on Tuesday as shipment delays in top producer Chile and robust demand prospects in China underscored the red metal's tightening supply-demand balance. A sluggish supply-side response following 2008's global economic downturn and the unexpected resurgence of world-wide demand for the industrial metal were seen keeping the fund-inspired rally this year fully intact.
"It's a tight market ... it's probably the tightest metals market out there from a supply-demand balance," said Evan Smith, co-manager of the US Global Investors Global Resources Fund, with about $850 million in assets under management. "Copper looks to be in a fairly significant (supply) deficit in 2011 ... demand is climbing and supply is not keeping pace." On the New York Mercantile Exchange, COMEX copper for March delivery closed up 7.00 cents, or 1.7 percent, at $4.2760 per lb, near an earlier record at $4.2895 per lb.
Prices have risen for three consecutive trading sessions, moving up 4.01 percent in the biggest three-day rally since December 3. Despite the impending Christmas Day holiday on Friday, volumes remained relatively firm at 27,660 lots - up nearly 2 percent from Monday's total, but 41 percent below the 30-day moving average, according to Thomson Reuters preliminary data.
Copper prices are up nearly 26 percent on the year, building upon a staggering 140 percent increase in 2009. Threats to an already tight supply chain escalated Monday after the world's No 3 copper mine, Chile's Collahuasi, halted shipments of copper concentrate following a weekend accident that shut its key ocean export terminal. "It's temporary, but it seems like many of these temporary disruptions are keeping a lid on supply while demand continues to rebound from the 2009 lows," Global Investors's Smith said.
The amount of copper held to back the exchange traded product increased by some 850.5 tonnes to 1,445.5 tonnes, according to ETF Securities' website on December 21. Copper stocks have climbed for the past seven sessions, but at 362,725 tonnes, are still down by over one-third from cycle highs of 555,075 tonnes hit in mid-February.
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