All,
Over the last month, the ASX materials indice has gone south, and the bloomberg global commodities index has also gone south, yet, Cu has not fallen but has infact had a marginal rise, even though Cu output has increased. Why?
As you have seen in my previous posts, Cu prices uncannily tracks US interest rates and similar gauges like 5 and 10 year bond notes.
Make no mistake, the talk of an interest rate hike has been enough to give some life into the Cu price. And even though there is aways doom and gloom on markets about interest rate rises and a shift away from commodity stocks into higher yielding instruments, history has shown that when US interest rates rise, so does copper.
The follwing seekingalpha article shows you how and why copper tracks interest rates and provides some cool charts. (you may need to register to read it in full, but it seems that you cn read the whole lot for free on your mobile, at least I could).
http://seekingalpha.com/article/4005022-will-fed-turn-market-red
Why is the argument for a Cu rise vs fall so compelling right now? Basically, US interest rates cannot get any lower, and at some point they will tick up. I don't think anyone would disagree with that. It is just a matter of when.
Despite the increase in copper production, the demand has been strong, with China pulling in the raw stuff at the highest rate in history in 2016. People get spooked by LME warehouse inventory, but this is just storage, nothing more. If you are importing that much, it has to go somewhere.
Copper likes US interest rate rises. The market has consistently bought the idea that if rates hike, the US economy is growing, consumption increases and therefore material goods made with copper is bought by the worlds biggest consumer. Now, something interesting happened in April this year, US GDP deciding to move upwards. It is still at a measily 1.1%, but grew from 0.8%. And that is reflected in US consumption, which is now absolutely churning along. See:
http://www.*.com/r-declining-invent...r-growth-consumption-surges-2016-8/?r=AU&IR=T
Basically, china makes the goods with copper and imports 40% of global raw material, but it takes the US to consume much of it it. (27% of total global consumer market it actually)
All up, I think, barring some european catastrophe like Italy going bankrupt, Cu will continue to slowly rise, with a possible explosion into the upside. It's now a matter of whether TGS has and will weather the current storm to move into a prosperous long life future.