Research Note, page-10

CCZ are in the right place at the right time with two very good Cobalt and Copper plays plus Co ZN. Good article below Copper, once buoyed by optimism over President Donald Trump’s infrastructure plans, is now being powered to fresh highs by optimism over China. Prices for July delivery were up 4.1 per cent at $US2.8405 a pound on the Comex division of the New York Mercantile Exchange overnight (AEST) -- its highest level since May 2015. The industrial metal used for manufacturing and construction has increased in 10 of the last 12 sessions. It’s up 14 per cent in 2017. Australian mining stocks surged on the news. BHP Billiton and Rio Tinto were both up 3 per cent, while OZ Minerals rose almost 8 per cent and Sandfire Resources was up 7 per cent. Copper got an additional boost after the International Monetary Fund increased its growth expectations for China in 2017 and 2018, while leaving its forecast for the global economy unchanged and trimming its forecast for the US. The IMF also raised its growth estimates for Europe and Japan. Overnight, copper eclipsed its previous high from February. Back then, strikes at mines and hopes that Mr Trump would quickly push through an infrastructure plan had extended a rally that started in October. Around February, nervousness that a US infrastructure package could take longer than expected and concerns over China and supply caused copper to retreat by as much as 10 per cent. Since May, prices have gotten a boost from supply threats and a brighter investor outlook on the strength of the world economy, particularly in emerging markets, according to investors and analysts. “Even in the absence of the US’s increased expenditure on infrastructure, global infrastructure spending remains very strong” driven by robust Chinese demand, said Nitesh Shah, a commodities strategist at asset management firm ETF Securities. Yesterday, a report from Citigroup showed that Chinese imports of refined copper rose from a month earlier. China accounts for nearly half of the world’s copper consumption, and its faster-than-expected economic growth and increase in industrial production have helped drive prices higher. Caterpillar reported overnight that Chinese demand for equipment to carry out infrastructure projects fuelled a 10 per cent increase in second-quarter revenue from the previous year. Shares of the manufacturer closed at their highest level since March 2012. Meanwhile, investors are monitoring Chinese monetary policy for signs of tightening, which could slow copper demand. Many analysts have also said they will watch closely how mine disruptions affect supply. Strikes at copper mines in Chile and Indonesia have swung prices this year and could lead to short-term price volatility, analysts said. Strikes often boost metals prices since they crimp production. On Thursday, the International Copper Study Group released data for April showing that world refined copper usage exceeded production for the second straight month. Hedge funds and other speculators are positioned for further gains in the metal. Net bullish bets on copper futures by the group rose to the highest level in five months in the week ended July 18, according to Commodity Futures Trading Commission data. Bullish bets outnumbered bearish ones by 74,233, the most since February 21. Many investors now have doubts that Mr Trump will be able to unleash a massive infrastructure package soon. However, political uncertainty in the US has spurred a retreat in the dollar. That’s actually also supported prices of copper and other metals, since a weaker dollar tends to help dollar-denominated commodities by making them more affordable for holders of other currencies. “I’m not sure that a big, extensive infrastructure program is in the cards anytime soon,” said Bart Melek, head of commodity strategy at TD Securities in Toronto. “People are still thinking that it’s a possibility, but it’s one that is diminishing.”