Copper prices lost half their value since reaching a record intraday level of $4.27 in May on the New York Mercantile Exchange’s Comex division.  

“Copper is usually a good gauge of economic health because it is broadly used, but more specifically because it is important to construction and equipment manufacturing that tend to precede other areas of economic activity, and that makes copper a leading indicator,” said David Coffin, co-editor of HardRockAnalyst.com.”

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While the US economy has slowed other parts of the world are still growing.  China is expected to grow at more than 10% and that growth is mostly driven by infrastructure development.

China could build up strategic reserves of copper, said William Adams, an analyst at BaseMetals.com. “They have massive foreign reserves, they may well want to diversify some of their dollar reserves and they are resource hungry,” he said. “They may well decide to buy copper now that it has fallen so much.”

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For the short term, some analysts believe there will be further drops in demand, a higher surplus of copper and continued disruptions to mining.  Given the bubble for base metals it was expected to eventually burst.  Western financial woes have helped alleviate the strain on the mining service sector that was experiencing difficulty keeping up with demand and mining services are still years away from meeting peak demand.

Coffin said “mining had been in a long-term bear market until earlier in this decade,” and few people were willing to get the training to do the specialized work of the sector. That, combined with the long time frames needed to bring new deposits into production, is “why we continue to view the mining sector as still being in a long-term bull market,” he said.

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