HONG KONG - Copper is the base metal with the most bullish potential in the second half of the year, due to continued tight raw material supply, improving Chinese demand and funds interest, industry participants and analysts said this week.

Benchmark three-month copper on the London Metal Exchange (LME) hit a record high above $11,100 a metric ton on May 20, a surge of nearly 25% in just seven weeks, due to fund inflows betting on copper usage in the green energy transition and a short squeeze on the U.S. exchange CME.

Jack Shang, co-head of Pan Asia Metals & Mining at Citi Research, said he received two or three requests a day last month from investors to know more about the metal - "what are the ABCs for copper and what are the equities to invest" in?

"Since then, the sentiment cooled down a little bit, but I still receive these requests on and off," Shang told an SMM seminar on Wednesday as metals participants gathered in Hong Kong for their annual meeting. "Even after the correction, which is mild, we are still seeing structurally consensus long."

Citi forecast copper prices would accumulate to around $9,500 until the third quarter and could hit $12,000 around the end of the year to the first quarter of next year, he said.

At a seminar hosted by the LME on Thursday, 51% of the audience picked copper as the metal with the most upside potential for the second half, followed by aluminium and nickel at 16% each.

Supporting the bullish copper story is continued tightness in the raw materials market and expectations that copper smelters will cut output.

Wang Yanchen, an analyst at SMM, said the copper concentrate and ore market could run a deficit of about half a million tons in 2025, widening from an expected 200,000 ton-deficit this year.

On Thursday, Chilean miner Antofagasta agreed copper treatment charges (TCs) with Chinese smelters at $23.25 per ton, a sharp reduction from the 2024 annual benchmark of $80 a ton agreed in November last year.

Low copper concentrate supply usually means a fall in TCs which hurts smelter's profit.

Big Chinese smelters so far have not cut output because more copper scrap supply, driven by higher prices, replaced some need for concentrate, and smelters still benefited from the supply feed at $80 in the long-term contracts, analysts said.

But scrap supply is getting tighter, while destocking of refined copper could happen in July when demand in China might pick up, said Juno Yao, research head of international business at Horizon Insights, told the LME seminar.

(Reporting by Siyi Liu and Mai Nguyen in Hong Kong; Editing by William Mallard)