Copper prices (NYSEArca:JJC) have recouped last week’s losses this morning as Greek Prime Minister Lucas Papademos won parliamentary approval for swinging new austerity measures aimed at securing a further EUR130 billion ($132 billion) bailout package from the euro zone.

Once the initial market euphoria on this vote in Athens runs its course, uncertainty will remain.

The last few days alone have brought running battles to the streets of the capital amid general strikes, and the final decision of euro zone officials remains unknown before they meet Wednesday to ratify the bailout package — or not, as the case may be.

Against this backdrop, the fundamental outlook for copper and copper ETFs (NYSEArca:JJC) remains relatively upbeat. [Related: Freeport-McMoRan Copper & Gold (NYSE:FCX)]

With the U.S. Federal Reserve pledging to keep interest rates low until at least 2012 and the European Central Bank last week returning to its own version of zero-rate policy, the International Monetary Fund still predicts that global growth this year will be 3.3%.

Economic activity in China (NYSEArca:FXI), which accounts for about 40% of all copper demand, will increase by 8.2% in 2012 and by 8.8% in 2013.

As an adjunct to this, wage growth in China remains high, with last year showing that real disposable income rose by around 10% and the government planning 13% minimum wage increases every year through 2015.

In a typical middle class house in China, as in the West, developers use around 400 pounds of copper in pipes, wire, and related goods, and as the middle class grows, there is little likelihood of home buying in China diminishing — or consumption of copper for construction falling off a cliff.

Against this demand profile, supply inventories tracked by the London Metal Exchange are already at a two-year low, after global mine output dropped by 200,000 metric tons in 2011.

Barclays Capital forecasts that incoming supply this year will fall 376,000 tons short of demand this year. Tellingly, perhaps, hedge funds are currently longer on copper than they have been since early August, according to the Commodity Futures Trading Commission.

In other words, we have recovered all the fundamental ground lost in the August market crunch, and are now back where we were in the relatively rosy early months of 2011.

Whilst gold has appeal as a store of value and is often seen as a ‘safe-haven’, copper is viewed as a barometer for economic prospects.

The reasons for this stem from its widespread uses, particularly in power and construction. It is an excellent electricity and heat conductor, used in cars, transport and communication systems, even mobile telephones and coins. Huge amounts are being used by industrialising economies such as India and China, and fluctuations in demand are therefore used to indicate future manufacturing activity in these countries.

The relationship works both ways, and last week’s strong manufacturing updates from the US, China and India led to an increase in the price of copper. Over recent years the price has been volatile as it has ebbed and flowed with general economic conditions, rising fourfold between 2003 and 2011, peaking at $10,000 per tonne, losing 21% during 2011 and currently standing at around $8,400.

On the supply side, much of the easily mined copper in the Americas and Australia has already been extracted. Thus, rather like oil, the next stage of production involves mining copper which is more difficult (and therefore expensive) to reach. It could also be a reason why China is believed to be stockpiling copper.

It is also worthwhile mentioning that, as yet, no easy substitute for copper has been identified for its more difficult tasks (the easier ones, such as plastic water pipes, are already in place). In the US, for example, some decades ago aluminium began to replace copper in wiring American homes, but was later removed after fires resulting from poor connections.

Overall, a picture of rising demand and finite supply paint a positive picture for the copper price. It is likely to remain volatile, however, and like all commodities it is extremely sensitive to the level of risk global investors are prepared to tolerate. Thus investors need to be aware of the risk of losing money, as well as benefiting from the demand/ supply dynamic.

How to invest in copper

One way could be through shares in a mining company, of which around ten can currently be found within the FTSE 100 alone. Most of them are involved in the production of copper within their portfolios, and there are others, such as Antofagasta, which only mine copper. This is a higher risk approach.

Percentage of revenues generated by copper (from half-year results 2011)

* Group’s revenue derived from Base Metal production

Share price movements

Equally, some experienced investors are becoming more comfortable with accessing certain countries, sectors or commodities by way of Exchange Traded Funds (ETFs). This reduces the company specific risk, but introduces counterparty risk. Also please beware of those that are leveraged.

Finally, a number of professionally managed funds exist to take advantage of the opportunities in commodities, including copper. One of our favourites, aimed towards adventurous investors is the JPMorgan Natural Resources Fund, managed by Neil Gregson.

If you are considering an investment please ensure you read the fund’s key features which contain details on the risks involved.

JPMorgan Natural Resources Fund

*Annual saving is not available in the SIPP or Junior ISA.

Copper futures rose, snapping a three-session slump, as manufacturing gains in Asia and the U.S. bolstered prospects for metal demand.

In January, a purchasing managers’ index gained in China, the world’s top copper buyer. A similar measure for India climbed at the fastest pace in eight months. Manufacturing in the U.S., the second-biggest consumer of the metal, expanded at the quickest pace in seven months as orders and exports accelerated, according to the Institute for Supply Management.

“Global manufacturing was good overall, so that’s giving copper some strength,” Fain Shaffer, the president of Infinity Trading Corp. in Medford, Oregon, said in a telephone interview. “The key with the U.S. report was new orders, and that’s encouraging.”

Copper futures for March delivery climbed 1.4 percent to settle at $3.842 a pound at 1:21 p.m. on the Comex in New York. The metal dropped 2.9 percent in the previous three sessions.

On the London Metal Exchange, copper for delivery in three months gained 1.4 percent to $8,440 a metric ton ($3.83 a pound).

Aluminum, lead, nickel and zinc also rose in London. Tin fell.

Last month, an LME index of the six industrial metals rose 11 percent, the biggest January gain since 2006. The Federal Reserve’s pledge to keep U.S. interest rates at a record low through late 2014 helped boost prices.

–With assistance from Unni Krishnan in New Delhi and Shobhana Chandra in Washington. Editors: Millie Munshi, Thomas Galatola

* Falling inventories show strong global copper demand

* Higher November Chinese copper imports likely

* Chinese copper smelters face production problems

HAMBURG, Nov 22 (Reuters) – Global copper demand remains firm despite fears of an economic slowdown and key consumer China is likely to raise imports again in November, Aurubis, Europe’s biggest copper producer, said on Tuesday.

“The general view that demand is suffering due to economic concerns does not seem to fit with the inventory trend in the metal exchange warehouses,” Aurubis said in a report. “Copper production does not meet the requirements.”

London Metal Exchange inventories <0#LME-STOCKS> have decreased continuously by a total of around 70,000 tonnes since the end of the European summer in mid-September 2011 and are now just below 400,000 tonnes, Aurubis said.

“The additional quantities registered for delivery add up to about 27,000 tonnes,” it said. “The reduction will therefore continue. There are only about 74,000 tonnes in the SHFE (Shanghai Futures Exchange) warehouses. Copper stocks are thus disappearing all over the place.”

Chinese copper and copper product imports rose sharply in October despite fears of a slowdown, Aurubis said.

“A higher (Chinese import) number is also expected for November, as the lower copper prices which started in early September will start having an effect,” it said. “In addition to the price factor, possible production shortages at Chinese smelters play a role as well.”

“They are currently struggling with low treatment and refining charges for concentrates and have announced that they would prefer to lower production than to accept lower TC/RCs.”

Treatment and refining charges (TC/RCs) are the fees paid by mines and traders to smelters to refine copper concentrate into metal.

Spot TC/RCs are currently falling because strikes in mines in South America and Indonesia have lowered volumes of concentrates on international markets, increasing competition among smelters to gain sufficient supplies.

“With this combination of factors: good demand in core markets, low stocks and insufficient production, it is not surprising that a possible market shortage is anticipated for 2012,” Aurubis said.

“This is a significant milestone”, explains Drew Pinto, President of Stamford Metal Products. “Refrigerants change and evolve, and it is essential that our products and manufacturing processes maintain the same high standards.”

Due to its high efficiency, R-410A is an increasingly popular choice for air conditioning systems. It operates at 50% higher pressure than R-22, requiring driers and other metal components to be made to higher, more stringent specifications.