By Leia Michele Toovey- Exclusive to Copper Investing News ^[1]

^[2]Copper prices have enjoyed an 80 per cent rally this year- on the back of Chinese State Reserve Bureau (SRB) purchases. Now, signs are pointing to the finality of those purchases. Inventories monitored by the London Metal Exchange ^[3] posted their first back-to-back weekly gains since February, increasing 8.6 per cent from an eight-month low, and at the same time U.S. copper-scrap exporters have reported declining purchases from the Asian country.

If China's purchases grind to a halt, so will the red metal's rally. So far, copper's ascent has been a China only story- that has overshadowed weak demand elsewhere in the world. The metal for delivery in three months was trading at $5,470 a tonne on July 28th. On the New York Mercantile Exchange's Comex division, copper futures climbed to a nine-month high of $2.579 a pound.

China may exit the market simply due to the fact that the government does not forsee being able to use up current inventories in the near future. Imports may have exceeded manufacturing demand by as much as 1.3 million tons in the first half. Refined copper imports by the Chinese more than doubled to 1.78 million metric tonnes in the first half of the year- reaching a monthly record of 378,943 tonnes in June, customs data show. "Excessive imports mean much of the purchased metal was just stored, raising the risk that they may sell it back to the market and depress prices," said Koichi Kaku, the general manager of the copper and precious metals sales department at Tokyo-based Sumitomo Metal Mining.

Another reason why China may halt purchases is the current price of copper. Copper's rebound, of course, is a direct result of Chinese buying in the first place. On June 29^th, an official at the National Development and Reform Commission, the top economic planner, claimed that China may not continue buying industrial metals for strategic reserves after prices rebounded.

Some analysts and producers remain bullish. Freeport-McMoRan Copper & Gold ^[4] Inc sees a tighter global supply base for copper and strong demand from China and the developing world favoring the industrial metal's longer-term outlook. "From a market standpoint, the recent upward movement in copper prices reflects some important fundamentals about this business that are going to be important for the long run, and that is the requirements for copper in China and the developing world," Chief Executive Officer Richard Adkerson told analysts on a conference call on Tuesday. New York based investment powerhouse Goldman Sachs was also optimistic on copper's future- at least on July 16^th. On that day, GS distributed a note saying that copper is poised to benefit from growing demand from emerging markets.

When it comes to betting on copper's future, Freeport's CEO is going to put his money where his mouth is. Adkerson plans to resume some planned expansion efforts. "We are looking at opportunities that we may have to increase some volumes without spending expansion-type capital," he said. He sees a huge opportunity at the Henderson molybdenum ^[5] deposit in Colorado. "The Henderson mine is a very efficient mine ... it would be a mine we could scale back up," he said. Adkerson said construction at the company's Tenke Fungurume copper and cobalt project in the Democratic Republic of the Congo (DRC) was essentially complete, with 26 million pounds of sales in the second quarter.

"By the second half of the year, all of our production costs will be flowing in and we will be up to design capacity," he said. "At design capacity and with $10 cobalt, we are looking at unit costs being less than 50 cents a lb." Commenting on the future of copper prices, and his company, Adkerson added "In the context of a weak environment in the U.S. and Western world, inventories are very low, the industry has and continues to face issues with new projects maintaining supplies out of existing mines, so the supply situation for copper is very well situated for miners," he said. "All of this indicates a very bright future in our view for copper and we're committed to being a very strong supplier of copper with great growth projects as we go forward."