World copper supply will be nearly balanced in the fourth quarter and through the first half of 2006, after which there will be a surplus for many years, a senior metals industry consultant said on Wednesday.
"I expect the market to have a tiny deficit in this initial period and I suspect the price peak is behind us," managing director of Bloomsbury Minerals Economics Peter Hollands said at the GFMS Base Metals seminar in London.
Copper prices on the London Metal Exchange are trading at about $3,600 a tonne after hitting a record peak of around $3,700 in recent weeks.
He said such high prices may encourage aggressive stock building of cathodes and concentrates by miners, while there was emerging evidence of consumers in the construction industry switching to cheaper plastic and aluminium from more expensive copper.
A tonne of aluminium costs about $1,850 a tonne on the world market.
However, investment funds - which have partly fuelled the rally in a market dominated by tight supply - had created a new elemental demand, according to Hollands.
"Very bullish and very bearish scenarios are both credible on various factors such as production, stocks, currencies and fund investment," he said.
This year investment funds are expected to pump about $80 billion into commodities - double last year's levels and up from $20 billion in 2003, with about 10 percent of that invested in metals, he said.
Dollar weakness since 2004 has been supportive for dollar-traded commodities, while a yearly seasonal rise in stocks in August was shrugged off by strengthening copper prices, he said.
"Even the 63-month future price of copper is above $2,400 a tonne, way above people's previously perceived long-term averages, while no one is confident about predicting future three-months prices."