Although the price of copper hit yet another low for this year of US$2.497/lb cash on the London Metal Exchange (LME) Wednesday, Barclays Capital base metals analyst Gayle Berry said she believes the red metal will keep diving until it hits rock bottom in the first quarter of next year.
"We believe prices will be under pressure through the rest of the year as weaker consumption becomes more visible in terms of rising stocks and the market moves into surplus. But we think that the weakest period for prices will actually be 1Q09," Berry told BNamericas in a telephone interview.
Berry added she anticipates the average for 1Q09 will be US$5,000/t (US$2.268/lb) of copper.
But despite the analyst's downward price expectations, she said the market presently does not have compelling reasons to believe the falling metal values will render projects unfeasible.
"We are a long way away from a critical situation," she said. "Prices are trading much higher than marginal production costs. In fact, copper prices are trading the farthest away from marginal production costs than any other base metal."
"With copper it's not an issue of whether or not production needs to cut back even in a weaker demand environment. That is because the production side of the copper market has been so incredibly weak over the past 6-8 months," the analyst added.
In the midst of the swelling credit crisis, the red metal has plunged in recent months faster than in decades, having reached a nominal record on July 3 of US$4.076/lb cash on the LME.
