Copper's golden age dawns, despite US recession fears
Tuesday, 15 April 2008
THE copper price is all about the upside, argues Barry Dawes from Martin Place Securities, and could hit $US14,000 per tonne despite the slowing United States economy.
Dawes, managing director of the Sydney-based investment firm, told MiningNews.net anxieties surrounding the United States economy should not extend to commodity prices.
Dawes, who is delivering a keynote presentation at today's Copper Investor Day in Sydney, said the key message was that demand would remain stronger than supply despite the US recession.
"Copper prices in US dollars were at a new all-time high last week, and despite all the gloom and doom about people worrying about that economy, which is a post-industrial economy, other economies around the world require copper," he said.
"The demand from China and Latin America in particular is very, very strong. And we have real supply problems for years to come."
As a result, Dawes tipped copper prices to rise as high as $US6.5-$7 per pound, or up to around $14,000 per tonne.
Dawes also said talk of potential oversupply in copper was misplaced, and the lesson of the last ten years was that many analysts had completely missed the bull market.
"The institutions are underweight, most of the analysts don't understand what's happening and they think the US recession is going to bring down the price of commodities," he said.
Instead, the main effect of the US recession would be to drive the value of the dollar down, which could have a complicated but not necessarily negative effect on metal prices.
However, Dawes said the main story was rising demand from growing economies, which should see a golden age emerging for copper producers.
"There is going to be a huge transfer of wealth to producers of these commodities and the stakeholders behind them," he said.
At the moment, copper plays were undervalued by the equity markets, especially when the copper price was taken into account.
"These companies have probably never been more discounted," Dawes added.
"Everyone thinks the end of the world is coming and they don't want to buy any more equities, but metal markets are booming."
The spot copper price has dipped slightly from record highs and was at $US8702/t overnight
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