Held in Santiago, Chile, the annual Cesco gathering doesn't appear to have been the bullish affair that might have been expected given the outstanding strength of the copper price in recent times.

The bears were especially populous on the demand side of the equation. According to Macquarie, while Chinese demand was expected to continue at reasonable rates, producers characterised demand in Europe and the US as being "weak" to "terrible"

While the bank said demand had been expected to be softer than the corresponding period 12 months ago - especially in the case of the US - "the fact that demand is weaker than it was in the second half of 2004 is cause for concern"

Accordingly Macquarie has now cut its Western Europe demand growth forecast from 0.5% to -2%, which in the process has changed its worldwide balance for copper from -100,000t to zero.

Still, the bank did pose the obvious question in light of this bearish news, vis-à-vis, "why are prices as still as high as they are and why is the copper market still in sharp backwardation?!" And also, "if demand is so weak in Europe and the USA at the moment, why is there no sharp rise in LME stocks?"

The answers offered include a possible "buyers strike". That is, consumers are reducing "pie line" stocks in the hope of buying at lower price levels soon.

Another possibility according to Macquarie is that copper producers accumulating material in off-LME warehouses on the basis that demand will eventually recover.

"Whatever happens in the next month or so could see prices move in either direction - a squeeze in LME prices remains, on paper at least, possible, although if some producers are panicked into selling, a frenzy of deliveries onto the LME to take advantage of the remaining backwardation could ensue," the bank said.

Meantime Macquarie reported that some producers would "welcome" a fall in prices - to US$1-1.20/pound - given concerns about what the phenomenally high prices will mean for supply growth in the future.

As well as lower prices, new copper miners may also have to put up with a "growing view" that treatment and refining charges (TC/RCs) will stay high for a prolonged period - through 2006 at least.

"There is a consistent view that spot TC/RCs will breach $US200/t and US20c/lb (US51.3c/lb combined) very soon (recent deals have been around $US180/t and US18c/lb - US46.2c/lb combined)," Macquarie said.

"With spot prices so high, it is not surprising to note that contract terms are expected to rise in the mid-year negotiations, with talk of likely settlements of $US100-110/t and US10-11c/lb."

Current spot TC/RCs reportedly see small miners currently entering the market giving away more than US40c/lb of the copper price.