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Copper has rallied 31 per cent in the first quarter of 2009; since December 26, the red metal’s price has increased 47 per cent.  This rapid upward swing has earned the metal the title best performer among the 19 raw materials tracked by the RJ/CRB commodity index. 

Copper’s ascent has been fuelled by Chinese purchases depleting available inventories. Refined copper imports by China, the world’s biggest consumer, will also increase this quarter, Wang Chiwei, vice president of Jiangxi Copper Co., China’s largest producer, said yesterday.

Shanghai copper rose almost 2 per cent on Thursday, buoyed by gains in London and a firmer tone in equities markets.  Three-month copper on the London Metal Exchange rose $20 to hit $4,080. Both markets are nearing recent five-month highs at 34,580 Yuan and $4,168, respectively. Copper futures for delivery in May rose 0.45 cents, or 0.2 per cent, to $1.8490 a pound on the Comex division of the New York Mercantile Exchange. LME copper inventories rose on Wednesday, up 2,150 tonnes to 501,775 tonnes. However, this did little to slow down copper as a rise in cancelled warrants showed outflows should quickly resume.

Industry participants are hesitant to claim the current trend will continue. “We don’t know if it’s temporary or how long the effect will last,” Diego Hernandez, president of BHP’s base-metals unit, told reporters. Chilean Mining Minister Santiago Gonzalez, whose country is the world’s largest copper producer, said December’s prices of $1.25 a pound for the metal are “in the past” as Chinese demand rebounds. Prices have touched bottom and are making “systematic” gains as the Asian nation, the world’s largest user of the metal, boosts purchases, “China is buying large amounts of copper,” Gonzalez said. “That’s part of copper’s recovery.” Demand in the U.S., Europe and Japan still is “very weak,” Eduardo Titelman, executive vice president of the Chilean Copper Commission, a state-run research group, said yesterday in an interview in Santiago.

While data from the US is mixed, there are signs that demand from the number two copper consumer has stabilized. On Wednesday, data showed a modest rise in pending sales of existing U.S. homes, but a report by ADP showing the U.S. private sector lost nearly three quarters of a million jobs in March kept exuberance under control. This week, analysts will hold their breath for  U.S. payrolls numbers to be released on Friday.

Company News

Xstrata Plc, the world’s fourth-largest copper miner, said it may buy other producers after a collapse  in equities slashed the cost of potential targets. Acquisitions may help Xstrata double copper output and take advantage of stronger demand once the financial crisis ends. The Switzerland-based company raised  US $5.9 billion in a share sale last month and may use those funds to help finance purchases in copper or other commodities.  A lack of financing for small- and mid-sized companies is creating opportunities for Xstrata that were previously “closed off” when equities were soaring, Xstrata Copper Chief Executive Officer Charlie Sartain said yesterday in an interview.

Grupo Mexico announced on Wednesday it had raised its shareholding in Southern Copper (PCU.N:) to 80 per cent from 75.1 per cent. Grupo Mexico bought 16.7 million shares of Southern Copper and Southern Copper repurchased an additional 33.4 million shares; the average price paid in both transactions was $13.45 per share. Southern Copper announced in October its board had approved a plan to expand its share buyback program to $500 million from $300 million.

Polish copper miner KGHM plans to make an acquisition in the fourth quarter as the group moves ahead with plans to expand beyond its home base. “In the second quarter we plan to carry out due diligence on the first project and to have a contract signed some time in the fourth quarter,” according to CEO Miroslaw Krutin. In February, KGHM earmarked $2.7 billion for investments to boost copper production and seek deposits abroad. “Our goal is to move forward quickly so as to take advantage of the current low asset prices, but to do so in regions with less overall risk,” the CEO added.