China’s Copper Bulk Buying to Drive Prices $3.20 - $4 per Pound in 2012

Speculations are rife that China is on a copper buying spree after the world's second-largest economy voluntarily disclosed the size of its copper inventories.

The Business Spectator said that as of late Wednesday China was heavily buying copper.

Now latest reports showed that China imports of copper rose to the highest level in 16 months in September.

Based from information gathered by the Financial Times Thursday, Chinese inventories kept 1.9 million metric tonnes of copper at the end of 2010 alone. The figures from the China Non-Ferrous Metals Industry Association revealed the Chinese have been buying and storing the raw commodity higher than the 1.0 - 1.5 metric tonnes median that analysts have used in the past. It is also more than what the U.S. consumes in a year.

These data imply that China's copper demand may actually have been less than presumed over the years.

Strategic investor Dennis Gartman told CNBC that a Chinese buying spree will push copper prices down.

"If the report is correct, then this is the kind of news that could take copper down... copper could test $3.20 per pound," Gartman said, noting that even if the CNIA data was based from 2010 figures, it still sends a signal to the markets that China is building up stocks.

"An increase in inventories is a new concept into the market and it should bring lower prices for at least the next several days," he said.

Meanwhile, Forbes analysts predict copper prices will reach $4 per pound in 2012, as increasing production mainly spurred by China's demand will eventually result in an oversupply, enough to push global market prices down.

Bloomberg, quoting figures from the Web site of China's General Administration of Customs, reports September imports of the refined metal, copper alloy and products jumped to 380,526 metric tonnes from 340,398 tonnes, up 12 per cent from August. Imports for a fourth month gained to the highest level since May 2010. The September data showed it was 3.3 per cent higher than the 368,410 tonnes of a year ago.

Since February, when copper reached an all-time record, the metal has declined by more than 11 per cent. Supply demand from China dwindled in recent months, with Chinese importers disposing their copper stockpiles, resulting in copper prices going down.