Source: Mineweb.com                               Date: 25 August, 2010

Going back a year or so, who would have predicted a jump in the copper price from a little below USD3,000 a ton to the current USD7,440 a ton in a matter of 20 months (a rise of around 150%)?  Thus a prediction from Credit Suisse analyst Michael Shillaker, of USD10,000 a ton in 2012 - a mere 34% increase - which has caught the headlines, is hardly as bullish a forecast as many would have us believe.  Indeed copper has already touched close to USD9,000 a ton back in the heady days of 2008 before the bottom fell out of the market.  Viewed in such terms the bullish prediction is certainly not out of line assuming Mr. Shillaker's demand assumptions are in any way reasonable.

Mr. Shillaker's analysis is predicated primarily on a further surge in Chinese growth.  He suggests that the recent signs of a slowdown in the Middle Kingdom’s economy have just been a bottoming out from a government instigated cooling, designed to try and control inflation, and expects there will be a further surge in economic growth, starting in the latter part of the current year which will carry on throughout 2011.  Indeed if this is coupled with any kind on meaningful industrial recovery in the West, then one suspects USD10,000 copper could even be a conservative estimate, particularly given supply constraints in the sector.

Not only does Mr. Shillaker feel that copper will be a major beneficiary of this upturn, but also other mined commodities, with bulks, like iron ore and coal benefiting strongly, as well as the other base and industrial metals, although he feels that copper's fundamentals are the strongest.  He is also quoted as saying that this suggests a big rise in mining company share prices over the next two years, looking for around a 30% increase overall by the year end and as much as 100% or more for some stocks over the next two to three years.

But, this all rests on continuing Chinese growth and a slow return to normality in the West - neither of which are certainties so although the odds may favour a strong period for metals prices ahead, this is by no means a foregone conclusion.