By Leia Michele Toovey- Exclusive to Copper Investing News

U.S. copper futures were able to hold on to their positive momentum until Thursday’s close, when consistent inventory builds and grim economic data suggested that demand will exert more downside pressure. 

Copper started the New Year with a bang, but the positive movement was cut short as negative sentiment reigned supreme. Copper briefly moved up this week, on Tuesday, buoyed by investor short-covering and a steadier tone in the price of crude oil. U.S. crude oil futures rallied 2 per cent on the back of colder weather in the United States and news of output cuts by Saudi Arabia and indications OPEC could cut again in March. On Thursday, poor sentiment pushed U.S. copper futures fell 3.6 per cent early in the day’s trading. Copper for March delivery was down 2.95 cents, or 2 per cent, at $1.4580 per lb on the New York Mercantile Exchange’s COMEX division.

Underlying sentiment in the copper market remained downbeat, as copper stocks in London Metal Exchange warehouse stocks  climbed another 5,175 tonnes on Thursday to a new five-year high at 387,325 tonnes. This sentiment is a far cry from last week, when I reported that the commodity index reset and economic stimulus actions in both China and the United States sent the metal off to a positive start to the New Year. 

So, exactly what can we expect from the copper market in 2008?  According to BMO, ongoing turmoil within global financial markets is confirming the concern that a deepening economic slump in the G7 and now China and the rest of the BRIC group is projected to keep copper consumption flat at best in 2009. Lower prices would likely elicit additional supply cuts, and set the stage for a modest rebound once global growth turns

David Thurtell, a strategist at Citigroup, said he expected the market to be well supported for now around the high $2,000s to low $3,000s. Further ahead it would depend how the recession panned out, he said, while pointing out that credit markets were freeing up gradually and governments were implementing stimulus packages. Copper prices may form a base near term as a continued lack of mine supply continues to rein back metal production and prevent big stock builds.  

Credit Suisse has taken a slightly more pessimistic tone.  In a note this past Thursday, The international financial services group does not see a recovery in the copper market until 2011 because of lower global GDP forecasts, a marked slowdown in China’s consumption growth and modest supply in the near term.
Many other analysts still expect a recovery in prices in the second half of the year, based on the view that economic stimulus plans will boost demand for raw materials. Credit Suisse has lowered its 2009 copper price forecast by 30 per cent to US$1.75 a pound and its 2010 forecast by 25 per cent to US$2.25/lb.

Chile, the world’s biggest copper supplier, said the value of its exports of the metal plunged by almost half in December to a four-year low as global demand slumped. Exports fell to $1.23 billion, the lowest level since February 2005 and down from $2.39 billion a year earlier. According to the Chilean Copper Commision,  shipments of the metal this year will decline by half to $18.1 billion from $36 billion in 2008. Exports will drop 1.1 per cent in 2010 to $17.9 billion, the group said this month.

At least two Japanese copper smelters have won a roughly 70 per cent hike this year in the copper processing fees they charge Billiton Plc/Ltd company officials said on Thursday. Asian copper smelters have been able to hike copper processing fees for 2009 due to a rise in copper concentrate supply, which has eased the competition between firms in need of the raw material to produce copper. But economic conditions are grim as global demand plummets for the industrial metal, which is used extensively in the power, construction and other industries

Australian zinc miner OZ Minerals Ltd, which is struggling to refinance its debt, revealed on Thursday that it had still not finalized a much needed bridging loan, though it said progress was being made. Oz Minerals, the world’s second-largest zinc miner, is slashing costs, cutting back production and looking to sell assets as it seeks to refinance $560 million of debt by February 27, against the backdrop of a plunge in metal prices. That debt matured last month and lenders agreed, subject to formal approval, to give the firm a bridging loan until the Feb. 27 deadline, but Oz Minerals told the stock market on Thursday that it was still in talks with one group of creditors. Oz Minerals has already shut a small nickel mine, placed one of  its smaller Australian zinc mines into care and maintenance,  and threatened to close its unprofitable Century zinc mine, the world’s second largest, if conditions worsen. It’s also shelved expansion at its Sepon copper and gold mine. Societe Generale, with which Oz Minerals had a dispute over a A$250 million credit facility, has also agreed to a further extension to a deadline by which Oz Minerals must grant security over certain Australian assets.