copper

Pinched this from Lightforce on the MGO thread.

Good read on copper demand



How to Cash In on the ?Clean Car?Copper Price? Connection
by Aaron Tyrrell, Editor, Money Morning

Diggers & Drillers editor, Dr Alex Cowie, is in for a busy week.
You see, I?ve just had a peek in his diary. And it looks like he?s meeting a different mining company every day this week in his hunt to track down the best Aussie resource stocks to recommend to Diggers & Drillers members.
In fact, he?s just walked in from a breakfast meeting with a coal mining executive.
But the thing I think you?ll find most interesting right now is the copper project he?s flying off to have a look at tomorrow.
Because, according to Alex, things look VERY bullish for Doctor Copper...
Copper market looking very bullish

Source: ANZ Commodity Research
Last week, the copper price jumped around 2.5% to finish up at $9,682 on the London Metals Exchange.
And none of the major financial news sources seem to agree why.
Reuters says it?s because people are flocking to hard assets, like copper, precious metals and crude oil, as a hedge against inflation.
But the Wall Street Journalthinks: ?Copper continued to benefit from bullish statements coming from an industry conference in Chile, the world's biggest producer of the metal, where mining executives predicted renewed demand over the rest of the year.?
And Reuters Africa reported:
?"The commodities market seems to have regained a life of its own, while in the past two years we saw a very strong correlation between anything that happened on the macroeconomic front and commodity prices," said Yingxi Yu, an analyst at Barclays Capital.?
Okay... I guess they could all be right... it could be an inflation hedge, the success of a PR campaign and the copper price has life of its own... or it could be none of the above.
I?m not sure.
All I know is Alex thinks it will probably hover between $8500 and $10,000 for the rest of the year. Although he sees some pretty compelling reasons why it will stay up ? and possibly break through the $10K barrier.
(Even though ?Eight of 16 analysts, investors and traders surveyed by Bloomberg, or 50 percent, said prices will drop next week.?)
You might remember Kris writing last week that Alex recently went to the Mines and Money conference in Hong Kong.
He spent a few days there, glad-handing mining industry big wigs.
What you?ll want to know most about today is what Alex learnt from the Robert Friedland presentation.
Friedland ? founder, Executive Chairman and Chief Executive Officer of Ivanhoe Mines (ASX:IVA) ? made a strong case for copper demand to go well beyond what most analysts expect.
As Alex told Diggers & Drillers subscribers last week, Friedland reckons the world needs another 20 mines like the enormous Oyu Tolgoi (a joint project between Ivanhoe and BHP).

Of course, as a copper miner, he?s paid to say that.
But he won?t drum up much business if he lies.
Which is why you might find this very interesting... Friedland revealed one of the most overlooked sources of demand for copper in his presentation... lithium batteries.

And I was surprised. But as Alex put it in the Diggers & Driller?s update last week...
?Like the spice in a curry, the lithium may be the bit that makes it work but is in fact the smallest ingredient by weight.

?The ?meat and potatoes? of the battery is copper.?
That?s not all...
Copper wiring is also used to power the electrics in these clean cars.
?According to General Motors Chief Engineer Tim Grewe, ?Copper has two important roles in hybrids: It runs the electricity, so you have large amounts of copper in the motor and battery, and, more importantly, the copper technology is making hybrids viable commercially.??

And, according to this article on Resource Investor from 2005: ?"The Toyota Prius... uses 50kg of copper per car... more than twice as much copper intensity per unit car as a conventional car."?
50 kilo?s of copper per car... that?s a tonne of copper for every 20 cars!
If you?re thinking of investing in copper stocks right now, this revelation should give you pause for thought.
If that?s not enough, think about this...
Back in June 2010, Toyota?s Executive Vice President Masatami Takimoto said he wanted hybrid cars to account for 100% of Toyota?s stock by 2020.
And China?s BYD Auto F3DM hybrid had just become available to the general public. At the time, Shenzhen planned to have 100,000 on the road by 2015.
These facts make you think China will need a lot of lithium to power those batteries.
Now it seems like it will need even more copper.
Unlike many of its global counterparts, China is actually following up on its clean, green promises.
Petrol-powered motorbikes are banned in Shanghai.
Electric bicycle production has grown out of sight ? around 20 million units were built in 2007 alone and the numbers are still climbing.
Porsche is looking to lithium to power its new 911, citing weight saving as a key motivator for the decision.
And Chinese cities are opting for electric buses over petrol guzzlers.
With 1,344,956,345 Chinese looking to it to power their personal travel needs, demand for copper to build these batteries should continue to grow.
Copper will also be needed by the ute-load for the huge network of bullet trains that the government is frantically constructing.

According to this Bloomberg article... copper demand in China jumped 29% last month. But it?s down 33% on the year.
Alex is a bit sceptical of the data. He reckons because the timing of the Chinese New Year changes every year, it makes an absolute nonsense of year-on-year comparisons.
He also warns you need to be wary of what you read in the mainstream financial press, because they have a tendency to only look at the data they want to.
According to ANZ Commodity Research: ?Consumption in Mar[ch] was similar to last year?s levels, suggesting that domestic production had been ramped up, according to a market participant.? And ?Copper stockpiles monitored on the SHFE dropped 7.7kt.?
That tells a different story.
I?d like to leave the final word on copper to Alex today, with this excerpt from his weekly update...

?There has been a resurfacing of the ?but hasn't china got lots of copper tucked away? argument...

?It?s an interesting idea ? that China has so many unreported sneaky copper supplies stashed away it could reduce global long-term demand. I'm sure it has got warehouses of the stuff.

?But the question remains whether China would actually part with this copper, or even use it when there was enough copper to buy on the open market.

?It's clear to me that it is far more valuable as a strategic reserve to be saved for a rainy day. It is worth more to the Chinese than a fistful of Yuan.?
(P.S. If you like, I?ll let you know when ? and if ? Alex recommends his next copper stock. Just send a message to the Money Morning mailbag or if you?re reading this on the web, leave a comment below. Catch you tomorrow.)
Aaron Tyrrellinched