Copper to peak at $4,500 a tonne in Q2 - CRU

06 April 2009 | 05:33 Code : 18925 Geoscience events
Copper prices should peak at $4,500 a tonne during the second quarter of 2009...

Copper prices should peak at $4,500 a tonne during the second quarter of 2009, but hedge funds will still be shorting the market and demand could be soft, the chief price forecaster for the CRU consultancy said Thursday.Copper for three-month delivery MCU3 on the London Metals Exchange has been trading at $4,155 a tonne."What we’ve been seeing is a short-covering rally in a bear market," Jim Southwood, president of price risk management for CRU, told Reuters about the run-up in prices over the past few weeks.Worries about a weaker dollar, energy prices and short-covering by funds have caused the rally, he said.Market players who have bet on a decline in copper have recently been forced to rush back and cover their positions to guard against further losses in a rising price environment.But there are doubts about whether the rally is sustainable during a sharp global economic downturn."The question for the third quarter will be: is demand still falling and is short-covering over," he said.Investment funds have slashed their holdings from last year, when their purchases drove up to 33 percent of the overall copper price.Southwood’s model, considered the first of its kind in the industry because it isolates the factors driving prices, was more optimistic last year.At that time, when copper was still near lofty levels of $8,620, his model turned out several scenarios, including one in which global prices rose to $10,000 or $12,000 a tonne. (Reporting by Terry Wade; Editing by John Picinich)

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