Should read about copper supply/demand
Post: 17215438
Cannot find where Gassin123 poster get source from
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Wrap-Up
When we look at the entire global picture, it is quite clear that copper demand will continue to rise. Across every sector, China is seeing growth, and the copper-dependent automotive industry is booming ahead as China's middle class grows. Both India and China are set to ramp up infrastructure spending, which would sharply increase copper demand, and investors should be watching for the outcome of the Aluminum vs. Copper debate in China, and the result of
India's Land Acquisition Bill as a signal for a steep rise in short term copper demand. Copper prices have risen nearly 30% over the past few weeks and appears to have little sign of slowing. This could be a short term hiccup or the accelerated timing of a supply surplus moving to a supply deficit. The bears seem to be losing strength in their speculation on copper, and the data is pointing toward rising prices.
I always believe that the simple explanation is often the most accurate, and while the copper market is all but simple, these facts are:
Supply Side
- All the main copper producing countries except Peru are decreasing production.
- Average copper head grades have been declining consistently, a continuation of long-term trends dating back 30 years
- Cost of production has been rising, and the energy input required to mine copper has been rising
- Layoffs across the sector and decreased capital expenditure forecast even more limited supply outside of Peru
- Increasing water and electrical shortages will result in more unplanned outages and shutdowns
Demand Side
- Copper is not readily substituted for any other material
- China and India have significant growth projections for copper demand in the near term while China has seen copper consumption grow in nearly every consuming sector
- A substantial amount of copper is moving to China from the LME
- A softening U.S. dollar will make commodities prices rise
Far from copper over supply, it appears we are headed for a deficit. The current rise in the copper price may be countered in the short term, but the long term trend is clear. Copper prices will need to increase to justify the supplies required to meet worldwide demand. My view is that copper has now bottomed, and if it does revert, it will only be short term in nature. It will not be long (12-24 months) before copper begins to rise sharply. How high it will go is hard to predict, but many companies will be returning great yields with a copper price of $US 3.00/lb based on their current valuations, a number that will be exceeded in the event of a copper deficit."
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