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Feb. 2 (Bloomberg) -- Copper prices, which more than doubled last year, are set to plunge as speculators unwind positions and global inventories expand, according to David
Threlkeld, president of metals trader Resolved Inc.

“We’re going to see a catastrophe in the market,” said Threlkeld, who first got the world’s attention in 1996 when he showed that hoarding by Sumitomo Corp.’s Yasuo Hamanaka would
lead to a collapse. Prices may slump to less than $1 a pound, he
said by phone. That about 67 percent less than today’s levels.

Copper, used in pipes and wires, sets the pace for other industrial metals. A slump in prices may reduce profits at mining companies including Freeport-McMoRan Copper & Gold Inc.
and drag other commodity prices lower.

Some 90 percent of buying “has been from speculators,” said Threlkeld, who has traded the market for more than 40 years. “Whether they are exchange-traded fund speculators or China pig
farmer speculators it doesn’t really matter, because that buying
is going to come back to the market,” he said from Arizona.

Three-month copper futures on the London Metal Exchange, which surged 140 percent last year after governments spent billions of dollars to lift their economies out of recession,
traded today at $6,750 a ton. China, the world’s largest user,
imported a record 3.2 million tons of the refined metal in 2009,
up 119 percent from the previous year.

Interest Rates

There are about 3 million tons of unreported inventories in China, said Threlkeld. The forecast for a slump to less than $1 a pound -- equivalent to $2,205 a ton -- may be driven by higher
interest rates in China and the U.S., he said. The prediction
reiterates an earlier call and didn’t come with a timeframe.

“Three million tons seems a bit excessive, given that that’s more than half of China’s total consumption last year,” said Li Rong, chief analyst at Great Wall Futures Co. China’s
copper consumption was about 5 million tons in 2009, he said.

China’s gross domestic product accelerated to 10.7 percent in the fourth quarter, the fastest pace since 2007, adding to speculation the country may step up efforts to prevent asset
bubbles. The International Monetary Fund says China’s growth
will accelerate this year to 9 percent from 8.5 percent in 2009.

“The way the figures are being reported is anything that’s shipped to China is assumed to be consumed, which is clearly ridiculous,” Threlkeld said. Stockpiles monitored by the
Shanghai Futures Exchange totaled 101,210 tons last week, more
than three times the level a year ago.

‘Unique Situation’

“What we have now is we have a unique situation, whereby we have a surplus and production has gone up and consumption has gone down,” he said.

Output exceeded demand by 191,000 tons in the 11 months to November 2009, the World Bureau of Metal Statistics said on Jan. 20. Inventories monitored by the London Metal Exchange grew
about 48 percent last year and stood at a one-year high of
543,525 tons yesterday.

“The price of copper is not just a function of how much inventory there is in the market,” said Li Junchao, an analyst at Western Mining Co.’s futures department. “While it’s true
that prices last year rallied way beyond their fundamentals, we
expect the market to normalize this year and $1 doesn’t quite
seem feasible.”