The recent bump in the price of copper has little to do with underlying fundamentals of supply and demand for the electrical industry's favorite metal. Countervailing forces in the world economy, combined with uncertainties about the size and movement of metals inventories within China, suggest that the dislocation between price and fundamentals may well continue.

Copper hit the highest prices seen in the past five months on Sept. 14, peaking at $3.85 per pound on the Comex market and $8,411 per tonne (metric ton) on the London Metals Exchange (LME), then gave back some ground the following week.

The run-up was due to three primary factors — the announcement by the European Central Bank (ECB) of a new bond-buying program to support debt markets in Europe, anticipation of a third round of quantitative easing (QE3) by the U.S. Federal Reserve and an announcement by China that it would invest 1 trillion yuan (about $158 billion) in infrastructure projects to boost its economy, said John Gross, a long-time copper market analyst and publisher of The Copper Journal.

As a result, said Gross, “We had the dollar go down, and all metals, base metals as well as precious metals, moving higher in response. The markets are not necessarily moving higher based on stronger fundamentals, but rather on central bank easing here and in Europe, and on the Chinese side with their infrastructure projects, and that has brought copper up to a multi-month high.”

China's infrastructure program came amid successive months of slowing economic growth in the country that accounts for more than 40 percent of global demand. A report from HSBC and Markit found manufacturing output in China fell in August for the 11th straight month.

Getting a bead on China's actual consumption of copper is as difficult as it's critical to estimating future demand for copper. “Part of the difficulty is we don't have good transparency on China's statistics,” Gross said. “We can track the Shanghai inventories, but the copper that's in bonded warehouses remains a mystery to the market overall. There are assumptions out there that the metal has moved from 500,000 tonnes to 600,000 tonnes in bonded warehouses. But there's no way to tell.”