Codelco, the world's largest copper company, yesterday took a cautious view on the outlook for the red metal. It warned that it was unclear if US demand had bottomed out yet, said Europe was stagnant, and that the only bright spot was China.
Its guarded view comes as copper prices have surged in the first quarter to above $4,000 a tonne. Though less than half last year's record of $8,940, the price has shot up 30 per cent in the first quarter, outstripping even a rally in gold and hitting heights unimaginable a few months ago given the global economic gloom.
José Pablo Arellano, the chief executive of the Chilean state-run group, which accounts for 10 per cent of the world's production, told a small group of reporters that China was behind the increase in prices.
Unlike other countries, copper consumption in China had remained steady in the first quarter as the metal fuelled a still-dynamic domestic economy, he said.
China has in the past been able to sate some of its voracious demand from locally produced scrap but Mr Arellano said that "production from these, if you like, urban mines, has been strongly reduced because of costs and so they have turned to buying more copper from traditional mines. That has been one of the factors that has generated bigger demand and bigger purchases from China."
Traders say China is also stockpiling copper and believe its secretive State Reserves Bureau is in the process of securing 300,000 tonnes with a view to buying as much as 1.2m tonnes. Global production last year was 18m tonnes.
Mr Arellano was more pessimistic about the copper market outside China.
Of the US, he said: "It's uncertain whether we've hit bottom or not [in consumption] . . . There are some signs that might be the case, let's hope so. But we need more evidence to say that it has bottomed out."
He was even more downbeat about the European market, saying struggling industries like manufacturing and construction, which are big users of copper, were keeping things "pretty depressed".
"Frankly, we don't see yet that recovery in that market has started," he said.
Though the US and Europe had yet to turn the corner, Mr Arellano was upbeat that recovery would come and with it greater demand for copper across the board.
He said large government fiscal stimulus packages contained major public works projects that should boost demand.
Mr Arellano's comments came ahead of the start today in Santiago, the Chilean capital, of the annual copper week, where more than 600 traders, industry executives and bankers will meet to discuss the outlook for the industry.