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Copper rises 40 per cent and raises hopes of turnaroundClancy Yeates
April 14, 2009
COPPER producers have been cushioned from the recession by a surge in the base metal's price of more than 40 per cent this year.

Copper's central role in such heavy industrial activity as power and construction has led some economists to view the surge as a sign of a commodities revival.

Although the price of about $US4400 a tonne is half what it fetched a year ago, recent rises have lifted the struggling stock prices of Australian producers.

Shares in the Queensland miner PanAust have risen 50 per cent since mid-March, closing at 30c last week, while the smaller West Australian Aditya Birla Minerals has more than doubled from 12c in mid-March to 27.5c, prompting a price query from the stock exchange on Thursday.

Aditya said it had no specific reasons for the surge but referred to the meteoric rise in the price on the London Metal Exchange, where copper has outperformed aluminium and zinc.

The bounce is thought to be a result of Chinese stockpiling. But some see it as cause for hope since it defies predictions of world growth contracting 1 per cent next year - the sharpest downturn since 1946.

A Westpac economist, Justin Smirk, said the rise in copper and a 20 per cent rise in oil prices since mid-February could be "early green shoots" in commodity markets but did not signal an imminent jump in prices.

With base metal inventory stocks on the London exchange at their highest levels since the early '90s, the rise in copper prices seemed premature, he said.

Mr Smirk said demand from China would not offset a 3.3 per cent decline in OECD economies this year. "China remains a support for prices, but there is not enough to drive them higher this year," he said.

More optimistic watchers say the increase could be sustainable. An analyst at Credit Suisse, Paul McTaggart, said it was well supported by a shortage in supply and cuts to capital expenditure from several copper miners.

Any rise is significant for Australia because commodities are the largest component of the economy's exports. Export revenue could fall by more than $30 billion this year because of a plunge in bulk commodity prices.