Copper futures at 5-month high

The expectation in London that economic and political problems in South Africa will soon affect copper supplies recently drove futures prices to a 5-month high of US$1.10 per lb.

But Richardson Greenshields of Canada analyst Raymond Goldie says the latest price spike, which occurred Sept. 20, does not necessarily mark the beginning of the next upturn in demand.

Even though there was a slight turnaround in demand during May and June, supply of the red metal is still running well ahead of consumption, according to Goldie.

“The sentiment in London is that problems in South Africa aren’t going to go away and if the Zairean economy collapses, world copper output would drop by around 4-5%,” he said.

The price increase has led to speculation that U.S. copper consumers are preparing to rebuild their stocks after allowing them to decline during the recession. Some of them are expected to replenish their stocks through the September futures contract.

However, Goldie said copper prices are following a seasonal trend by rising at this time of year while shares of copper producers fall. He advises potential investors to wait until November before buying copper equities. Meanwhile, the precious metal gold, which had been hovering under the US$350-per-oz. level, recently rallied and was trading above US$352 in London at presstime.