Copper Pops on Global Demand

NEW YORK (TheStreet) -- Copper prices have zoomed in the last two trading sessions. Copper for three-month delivery on the London Metal Exchange closed at $7,850 per ton on Tuesday from $7,770 per ton at close on Monday.

Copper stocks have rallied in trades on Monday and Tuesday as dropping inventories signal a revival in copper demand across the world. In the last two days, Freeport-McMoRan Copper & Gold (FCX) has risen 5.7% to $83.66, Southern Copper (SCCO) is up 3.3% to $31.91, while Teck Resources (TCK) has surged 7.4% to clock a 52-week high of $43.30.

The outlook on these stocks continues to be positive. Freeport-McMoRan has 13 buys, five holds and one sell rating, while Teck Resources has seven buys, two holds and no sell ratings, according to TheStreet's analyst ratings guide.

Copper prices have increased 6% this month, driven by increasing demand and a reduction in inventories. Copper closed at $7,814.50 per ton for spot delivery on the LME, 4.5% above Friday's close. Analysts see prices maintaining the upward trend from April as new fund money returns and economic activity improves.

"Copper is down from quite a high level," Herwig Schmidt, head of sales at Triland Metals told Reuters on March 30. "It is pausing for breath at the moment. We've now seen five consecutive quarters of higher prices, which will mean some new money flowing in."

Copper inventories on LME, which touched a high of 552,325 metric tons on March 2, have subsequently dropped 6% to 514,900 metric tons, reflecting an increase in global demand.

Inventories on the Shanghai Futures Exchange have also declined 8% from 169,101 metric tons on March 18, to 155,465 metric tons on March 25. This is despite China, the world's largest copper consumer, witnessing a 6.5% increase in copper production in February to 358,000 tons.

Copper miners too are upbeat on the future of copper. Copper prices may rise in the medium term as demand is rising faster than supply, Matthew Hird, chief financial officer of Kazakhmys, Kazakhstan's biggest copper miner, told Bloomberg.

OZ Minerals' Chairman-elect Neil Hamilton commented in the company's annual report Tuesday, "Demand from China and also India continues to grow and, in the medium term, the outlook for the market looks very strong," adding, "We consider its outlook to be superior to any of the base or precious metals."

In contrast, Jiangxi Copper, China's biggest producer of the metal, said demand growth will slow this year and prices may drop in the second half, as some countries may start to end their stimulus policies.