http://www.theaustralian.news.com.au/business/story/0,28124,24892...

http://www.theaustralian.news.com.au/business/story/0,28124,24892706-36418,00.html

THE price of copper fell by 60 per cent last year but a small recovery is tipped for late this year.

Copper futures for March delivery fell US3.25c, or 2.2 per cent, to $US1.479 a pound on the Comex division of the New York Mercantile Exchange yesterday. Prices reached a record $US4.2605 a pound in March.

Commonwealth Bank commodity strategist David Moore said no one could say with certainty when and at what level the copper price would bottom, given the deterioration in the international economic outlook.

"Still lower copper prices are possible, especially as the supply side response to lower copper prices has so far been relatively limited," he said.

The copper price is expected to rise modestly in the latter part of 2009 and in 2010 as an eventual improvement in the international economic environment translates into growing consumption of the metal.

The copper market figure are likely to show a small surplus for 2008, and remain in a moderate surplus in 2009, providing a headwind to any recovery in the copper price.

Goldman Sachs said copper had the strongest fundamentals of the major base metals. The fundamentals were strong for several reasons, including the fact that China was not a major producer of copper concentrate, and was therefore critically dependent on imports.

In addition, the recent price collapse had greatly reduced the incentive to collect, distribute and process scrap metal.

"We therefore believe secondary refined production will fall sharply in 2009," a Goldman Sachs client note says.

The analysts predict real demand for copper will fall in 2009 but they also believe Chinese re-stocking will offer some support.

"While we envision a moderate annual surplus in the order of 100,000 tonnes this year, we believe the second half of the year is likely to see a tightening of the market and a significant price recovery," Goldman Sachs said.