Slower demand should reduce supply worries over the balance of the year and push copper prices down around $3.29/lb late in the year from the $3.66 average through mid-May, suggests BNP Paribas analyst David Thurtell at a recent conference in Sydney, Australia.

Still, his full-year forecast of $3.63/lb for London Metal Exchange (LME) benchmark copper is higher than the $3.50 consensus estimate.

"The world economic outlook isn't nearly as strong as in 2005–2006, but that so far hasn't mattered to mining," Thurtell tells the RIU Sydney Resources Round-up conference as reported by the Dow Jones Newswires. "Supply problems for copper and aluminum, growth in China, pension funds and producer consolidation have kept prices up."

However, he agrees that Chinese consumers are balking at copper prices in excess of $3.63/lb, which is $8,000 a metric ton. He points out that China's State Reserve Bureau restocked copper reserves to the tune of 250,000 metric tons last year, "so Chinese copper buying will be more disciplined" in 2008 and 2009.

There are risks to reduced pricing outlooks, though, he says, pointing to possible overbuilding of inventories by consumers that tighten supply artificially or to excessive purchasing of futures by investment fund managers seeking long-term commodity exposure.

He also frets that mine-supply disruption, such as the strike at Chile's Codelco that lasted 20 days earlier this year, could push copper to new record highs yet again.

In fact, Chile's central bank says the springtime strike by copper workers and other operational problems in the mining industry will reduce the country's gross domestic product in the second quarter and push the copper price upward. Earlier, the central bank president, Jose De Gregorio, had expected LME copper to average $2.95/lb, down from $3.25 last year.

Thurtell also sees problems in key producer regions of Africa, the Congo and Zambia, could significantly change copper's supply outlook. He says that "miners there are struggling with mind-boggling levels of corruption (which) will discourage development of some new mines."

Aside from corruption, infrastructure problems including insufficient power, roads and ports will hamper new projects from starting output as planned, Thurtell says, adding: "These areas have huge potential, but in some cases, it looks to remain just that."

Analysts at Credit Suisse, following a recent visit to Congo, now believe some 500,000 metric tons of expected additional copper supply is unlikely to come on-stream any time soon due to severe power shortages in Katanga province.