Copper prices hit $10,000-a-tonne psychological level for the first time as business activity measures indicated global growth was accelerating beyond expectations.

Service sector data from purchasing managers in the UK and eurozone presented further evidence that growth was picking up. This followed a similar picture from manufacturing sector data earlier in the week.

The red metal’s sensitivity to the strength of the global economy has earned it the nickname Dr Copper. Its rise through the landmark level is seen by many as evidence that fears of a double-dip recession are overdone.

Meanwhile, on Tuesday leading miners reported lower-than-expected production levels for the metal and traders bet that strong economic growth would push up demand.

Copper for delivery in three months at the London Metal Exchange rose to a record high of $10,000 on Thursday, up from the previous day’s close of $9,945.

In spite of record prices, Michael Widmer, metals analyst at Bank of America Merrill Lynch in London, said copper was “a buy” and forecast an average price this year of $11,250 a tonne.

“Underlying fundamentals on the copper market remain healthy,” he said.

The red metal is benefiting from strong demand globally but the main driver continues to be disappointing supply, with forecasts of a growing shortage this year and in 2012 suggesting a further drawdown of inventories.

The collective output of the top four listed copper miners – Freeport-McMoRan, BHP Billiton, Xstrata and Rio Tinto – dropped 12 per cent in the first half of 2010 from a year earlier. The preliminary data for the second half of the year have also disappointed as companies struggle with older and more costly mines.

China could derail the rally, however.

Physical traders said Chinese companies were not buying at current prices and were maintaining that they would not return to the market for some time.

China is the world’s largest importer of copper and the swings in trading of the metal have a large impact on prices in the two top copper markets, Shanghai and London.

However, copper bulls point to the strength of consumption in the US and, to a lesser extent, Europe. “Although China has, during the past few years, been the main copper demand driver, it is worth noting that the world excluding China still accounts for roughly 60 per cent of total consumption,” said Mr Widmer.

Source: http://www.ft.com/cms/s/0/3782d0d2-2e56-11e0-8733-00144feabdc0.html?ftcamp=rss#axzz1Cuihxan2