Investors increase bets on copper as fundamental picture for demand brightens

Chinese investors whose rush into copper drove it to 16- month highs this month say infrastructure spending and government reforms will keep the metal well supported this year and into 2017, Reuters reported Monday.

Copper surged more than 11 percent in a week in early November – its biggest weekly jump in six years – fueled partly by new investment from small investors, according to brokers and traders at last week’s Cesco copper conference in Shanghai.

While London copper has since lost some of these gains, it is sitting around $ 5,480 per ton, some 10 percent above its levels of the past year, with many in the industry seeing an end to a years- long bear market.

“We have a very active government- sponsored infrastructure investment program this year but the manufacturing business is still at a very depressed level,” said Gao Xiaoyu, president of China Minmetals Non- Ferrous Metals Co, on the sidelines of the conference.

“I think this sector ( manufacturing) will improve and that is the biggest demand for metals. Next year could be better for metals demand.”

With China’s economy showing further signs of steadying, efforts to curb supply that have driven up steel and coal prices have boosted confidence in a fundamental demand pick- up as the higher prices have stuck.

“There is a basis for this price rally due to supply- side reform,” said Luo Shengzhang, general manager of trader Jinchuan Maike Metal Resources.

“Supply has been curtailed, while demand has grown. As a result, we see that the apparent consumption of commodities is in very good shape,” he said.

The rise in copper has also been spurred by a return to the sector by retail investors, said Tiger Shi, managing director of Hong Kong- based broker Bands Financial.

Chinese investors are banking on their knowledge of their home market, which is set to account for 49 percent of copper demand next year, according to the International Copper Study Group.