Copper Will Stay Above $8,000 This Year: Analyst

The price of copper will stay above $8,000 this year despite a slowdown in China, the world’s biggest consumer of the metal, according to Kemal Bagci, director at RBS Markets.

Reel of uninsulated copper wire
Charles D Winters | Photo Researchers | Getty Images
Reel of uninsulated copper wire

Since the beginning of 2012, copper prices have fluctuated, and in April prices dipped below the benchmark $8,000 a metric ton for the first time since January, with markets seeing the decrease due to China’s lessened demand for the metal after a glut in their inventories in 2011.

However, demand for the metal remains high due to its manufacturing industry, which is growing despite a general sluggishness in the Chinese economy.

Bagci told CNBC’s “Squawk Box Europe” that volatility in the commodities market is due to concerns over a major slowdown of economic activity in China, with the country being the largest global consumer.

He expects the Chinese government will take measures to stimulate their economy, despite growth forecasts of up to 8 percent this year.

“We’ve seen very a very volatile commodities market this year with strong gains during the first quarter,” Bagci said.

“The gains are melting away particularly due to concerns over Chinese economic performance.”

Market concerns have led to copper being oversold recently, Bagci said. He believes that China’s economic growth – which he thinks could be better than expected this year - will continue to boost commodity prices.

China accounts for 40 percent of the world’s copper buying, as it relies on the metal for the creation of its energy and housing infrastructure, and prices are expected to rise due to low inventories and steady demand.

“We expect that the prices will still rise above $8000 this year, even though Chinese imports have come down a little bit,” Bagci said. He expects the supply deficit to help boost the market.

“China is facing strong challenges via urbanization and creating affordable housing so copper demand should still grow at a 6 percent rate on average. That will definitely support copper prices before the deficit melts away, probably in two or three years’ time,” he said.