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China's Growth to Fuel Copper, Nickel Demand: Expert(2007-3-4)

March 4, 2007

An urban construction boom in China over the next decade will fuel the global market for copper, an analyst told delegates at an international commodities convention on Sunday.

Demand will explode as some of China's rural population shifts to the cities, Onnu Rutten of Scotia Capital in Toronto said at a market-outlook forum, the first major event kicking off a four-day commodities industry love-in hosted by the Prospectors and Developers Association of Canada.

Rutten predicted demand for copper in China will increase from seven kilograms per urban resident to 12 kg over the next eight to 10 years, and said he's not concerned about China's economy slowing until 2015.

"That's a bold statement," Rutten acknowledged, given widespread fears among some investors about the 8.8 per cent drop in the Shanghai stock index last Tuesday, which had a global ripple effect on markets.

"China is at the point where Japan was in 1960," Rutten said, adding demand is also growing for copper in Brazil, Russia, and India. He said he doesn't see India as a big consumer of copper over the next decade since its growth is primarily in the service sector.

China is also leading the world in its demand for nickel, said Santo Ranieri of Xstrata Nickel.

"China will be the main driver of nickel demand," Ranieri said, noting demand for stainless steel rises as countries become more prosperous. "China is expected to remain heavily reliant on imports."

The main problem will be trying to maintain supply to keep up with demand, and the industry has "little wiggle room to increase output," Ranieri said.

"The market for commodities will remain robust," Ranieri concluded, noting pension funds and other major investors have also boosted demand in the sector, keeping prices generally healthy.

Supply is also plaguing silver, said Jim Steel, a commodities analyst with HSBC Securities Inc. in New York, who said prices are at historic highs.

"It will take many, many years before the market can catch up with the rapacious demand we're seeing from the far east," Steel told a rapt crowd packed into a large theatre at the convention centre. "It's safe to say industrial demand for silver is going to remain quite firm. . . . Even my . . .10-year-old is aware demand in China is going up," Steel said.

Silver is also popular among older, sophisticated retail investors, Steel said, who are buying it to diversify their portfolios [Canadian Press News].

"These people are not going to be shaken out by a few dollars off (in price)," he said.

While prices in precious metals dropped in the 1990s during a period of globalization and the opening up of the former Soviet Union, the current tension in international politics will keep silver prices propped up, Steel said, noting silver has been outperforming gold.

If investors choose to liquidate their precious metals, it would affect silver more than gold, Steel said.

The 75th annual conference for the mining exploration and development industry, which continues through Wednesday, is expected to attract more than 15,000 industry players.

Highlights include seminars, speakers, technical programs in geoscience and geochemistry, investor booths and an industry trade show.

Another speaker was bullish about the yellow metal, predicting prices for gold will be more than US$700 an ounce by the end of 2007.

"We're not too perturbed about what happened to the gold market last week," Martin Murenbeeld, an analyst with the Dundee Group of Companies, said.

Murenbeeld outlined a handful of reasons why demand for gold will stay strong, including the influence of the overvalued U.S dollar; high oil prices, which will encourage wealthy investors in the Middle East to buy gold; a drop in worldwide mining output, which should reduce supply; and increased consumer spending on gold as a way to diversify investment portfolios.One of the most important hermes replica handbags buying tips when it comes to gemstones, is to beware of imitations in plastic and glass. The cartier replica watches is all about introducing the finest selection of merchandise that combines style and comfort.

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