Over the past month, copper prices reached their lowest level in 18 months, dipping below $7,000 per tonne.

ETF Securities said this downward trend was due to expectations that the copper market would return to a surplus for the first time in two years as a result of new supply from new and existing mines outstripping demand.

However, the research said that supply is expected to tighten due to labour disputes in Chile and the recent collapse of  Rio Tinto’s Bingham Canyon mine in the US, which has  reduced mine production by 50 per cent.

Continued growth in Asia, which accounts for over 60 per cent of global demand, will also remain an important determinant of copper price performance, the firm said.

According to Chinese metal research company Antaike, demand for copper in the power sector remains strong, accounting for over 45 per cent of copper consumption in the country. Industrial output of power cables, a significant source of demand in the power sector, rose by 38 per cent in the 12 months to December 2012.

ETF Securities pointed out that although eurozone demand is likely to remain sluggish, following a seven per cent decline in consumption in 2012, demand in the US is likely to remain high due to growth in the construction industry.

"A sustained move lower in global inventory positioning, supported by rising Chinese imports, would indicate strengthening Chinese demand and the beginning of a potential turning point for copper demand. With mine supply uncertainty threatening to push the copper market into deficit in 2013, the beginning of the stock drawdown could provide a potential entry point to establish long copper positions," said Martin Arnold, research director.