After hitting a record high of $4.62 a pound on Feb. 14, copper prices have fallen off nearly 9 percent to close at $4.23 yesterday. Analysts have largely shrugged off the decline as temporary, though, convinced that China’s on the verge of more buying – even in the face of dwindling global supplies.

“Taking the risk of contagion in the MENA (Middle East/North Africa) region out of the equation, then copper has a very good chance of rising a lot higher,” Martin Squires, executive director of J.P. Morgan Securities, tells the Wall Street Journal. “I don’t think the industry is carrying a lot of stock, global PMIs are robust and in some places the best they’ve been in years. Could copper see a new high? Most certainly.”

China, in particular, appears poised to start buying more of the red metal after scaling back imports towards the end of 2010. The country sold off its contracted and warehoused metal early this year as prices spiked. Now, they’ll look to replenish their stores even as analysts like Squires predict a supply deficit of between 500,000 and 600,000 tons this year.

In a recent interview with Bloomberg, Lundin Mining Corp. Chairman Lukas Lundin argues that the metal is in the midst of a 10-year supercycle.

“I’m very bullish on the copper price because we can’t meet demand,” he says. “If the economy stays strong, mining is going to be unbelievable for the next five to 10 years minimum.”

Don’t expect the 10-year bull market to rise in a straight line, though. Analysts say China will start importing more copper soon, but that buying hasn’t happened yet. Customs numbers released yesterday showed China’s copper purchases dropped 35 percent in February – the biggest decline in more than two years. Not coincidentally, copper spiked to all-time record highs in February, which played a big role in the decline in demand.

“I think Chinese participants are still waiting for more declines,” Zhuo Guiqiu, an analyst with Minmetals Futures, told the Journal. “We saw a lot of Chinese buying when LME copper was around $8,000/ton, so I guess many people are still waiting.”

The moral? Copper will likely keep falling until demand in China picks up. When it does, we might just see copper at $5 a pound. U.S. Global Investors Inc., which manages $3 billion in San Antonio, said in December that copper would reach $5 a pound within 24 months. We’ve got 21 months to go.

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