While investors have flocked to gold this year – pushing prices to record levels – copper is another metal with potentially lots more room to rise, according to ING Investment Management.

The firm predicts that Chinese demand for copper is going to increase in the near future, despite some contradictory data coming out of the country.

“The latest Chinese copper imports data have been rather puzzling. February import data fell considerably but it was distorted by the Chinese New Year. March saw a reversal of this, with copper imports rising. However, copper volumes imported fell back in April for a -18.2 per cent year-on-year and year-to-date decline,” says Koen Straetmans, senior strategist, real estate and commodities.

“It appears that China has become more sensitive to commodity prices, with import volumes declining on selected commodities where prices have risen sharply, like copper and coal. The question then becomes whether this is due to a fall in end use demand or whether it is more related to inventory management. It is our view that the latter seems to be the case.”

The firm notes that copper inventories in Shanghai have been on a declining trend, in line with falling imports – yet some of the reason behind this is the relative copper price differences between the London Metal Exchange and the Shanghai Futures Exchange. Put simply, the fact that the SHFE had been above LME prices made imports unattractive, but this may be about to change as SHFE prices have moved above LME lately. This, ING IM says, could indicate a rise in copper imports to China in the near future.

“The fall in Shanghai copper stocks seems to indicate that end demand remains strong. Copper semi-production rose in March and orders are rising as end demand is strong. And the end of copper destocking in China may be near. London Metal Exchange stocks could ultimately also start falling again in such a scenario,” says Straetmans.