LONDON (Reuters) - Copper prices could hit fresh record highs this year as the Chinese economy continues to expand despite a slowdown in the United States, the chief economist of miner Rio Tinto (RIO.L) said on Thursday.
“I think the conditions still exist for yet another peak in the prices of most metals,” Vivek Tulpule, chief economist of the world’s second largest miner by market capitalisation, told Reuters in an interview.
Asked whether copper prices, which hit a record high of $8,940 per tonne last week, could surge to further peaks this year, Tulpule said: “Yes.”
Industrial action at the world’s top mines pushed copper to record highs, but the demand from China, where the market looked to take up the slack amid a U.S. slowdown has been weak so far this year.
This is due to the stocks they’ve built and once those stocks are depleted — as the underlying demand remains robust — the Chinese are likely to come back to the market, Tulpule said.
“Supplies remain constrained and there’s scope for demand pick up once the Chinese stocks, which have been built in the past, are taken away ... In a few months time, there will be conditions for strong buying,” he said.
Tulpule said he believed the Chinese economy was “decoupling” from the West, and that it would still grow strongly despite a slowdown in the United States, ensuring strong demand for metals.
“The Chinese economy is pretty resilient to U.S. slowdown ... We don’t see a big effect coming back into commodity markets,” he said.
Another bull market could be aluminium. Tulpule said a shortage of electricity was a key issue for the market for energy-intensive aluminium, and it was affecting production.
“People are worried about supply disruption associated with electricity supplies...I don’t think that dynamic is going away.”
Tulpule’s comments were confirmed by reports from China, where the top 20 aluminium producers will cut production 5-10 percent from July to push up prices and reduce power consumption.
The news pushed aluminium to a fresh record high of $3,350 per tonne, exceeding a previous all-time high touched earlier this week.
Rio Tinto managed to secure a record price hike — up to 96.5 percent — in this year’s iron ore contract talks with the Chinese steelmakers as the bottleneck in iron ore shipping continued to buoy prices.
“We’ve had a very good price rise this year, entirely consistent with fundamentals,” Tulpule said, but he declined to predict how much the price hike would be for next year.
The demand for steel, particularly in China, was strong with the construction boom going on and a shortage of key raw materials meant higher prices in the years to come, he said.
“What we see over 1-3 years is pretty robust conditions ... In the long run prices are probably going to be much higher.”
Reporting by Humeyra Pamuk; editing by Peter Blackburn