In the immortal words of Yogi Berra, its ‘déjà vu all over again' for copper! Copper producers and investors - even those with the typically short memories of many investors - may remember that almost exactly a year ago, copper prices took an almighty plunge. That time the fall took copper back to below $2.50 a pound by February this year - and the main cause -a big rundown in metal purchases from China. Those who can remember as far back as those early months of this year, may even recall an equally spectacular metal price recovery which had the copper price moving up around 50 percent between then and May.
Is this market position about to repeat itself? Whether the timing will be the same obviously remains open to question, but many of the factors which caused this abrupt downturn and an equally abrupt recovery are in place yet again.
Chinese purchases are down and there is also a likelihood that stocks will be run down up until the Chinese New Year. Supply and demand are in balance - or perhaps even in a small surplus. Both are recipes for the metal price to remain weak for the moment.
But, looking to 2008, assuming China's overall growth continues, and the US and western economies manage to avoid a real recession, all the indications are that copper output will run into an availability deficit during the year, which will continue until late 2009. We commented here in early October that one of the most respected specialist metals consultancies thus reckoned that the copper price would reach $9,000 a tonne - $4.45 a pound - in 2009 - see "Copper to $9,000 - upside underestimated".
If the past year's patterns are to be repeated, which is likely given that overall copper stocks are low, then we would see the big pick-up starting again in the Chinese New Year in February. In the meantime though, should the Chinese hold off purchasing, we may yet see further short term falls in the price. But the overall price pattern appears distinctly bullish in the medium term. This could provide some great invest ment opportunities towards the end of the year and early next.
(from Mineweb.com)
CUO
copperco limited
