In my view the SP is currently building a classic double bottom. Quite a lot of people have bought around 20 cents only 2 weeks ago and is more then understandable that those without a long term view are just taking profit. Therefore I guess that in the next days we might see the 19 or 20 cents again. Maybe...maybe not.
I have found some actual and interesting views on zinc and copper. Surprisingly zinc price has not really lost much ground in the last 10 days. Pretty stable and therefore good for BTR. Copper has lost more and the forecasts have been cut. Nevertheless it seems that 1 ton of copper will still cost between 6000 and 6500 US$ in the next 2 years. Lot of shorting in the copper market. Record shorts in a 5 year view. A contrarian would say: buy copper. On the other hand: Have we really see a crash in the copper price? Okay...we have lost 15-20% in the peak. But is this a crash? However....at a production cost of US$ 3500 per ton (based on the scoping study 2012) Kitumba would still be profitable. Probably. Let’s see what the result of the PFS will be.
However....in the long run 2016 and beyond significant additional new supply is required to meet long-term demand growth. This is my opinion too. And therefore I have to be patient and I have to wait.
At the moment you have 2 options: You believe in the story or you do not. If you do not then you better sell. If you do, then you better wait. I am pretty relaxed and I will wait.
I am realistic enough to know that we have to wait maybe 2-3 years to see the above A$ 1 level again. That’s 2016-2017. Till then I hope to see a positive PFS and further exploration – possibly with more excellent results from Kitumba, Kakozhi....Mumbwa. S
Slightly higher zinc prices turning toward US$ 2500 the ton (which would be nice for BTR). Maybe some good exploration news from Perkoa.
One thing I know for sure: The same analysts that were so enthusiastic about everything 12 months ago are the same analysts that today are telling us that in everything will stop to exist in a few months. Will China dissapear from the globe ? I doubt....
Zinc
A few thoughts in regard of what is currently going on in the zinc market. Looking at the zinc market as a whole, we realize that while gold silver and copper prices were hit hard this week after US Federal Reserve Chairman Ben Bernanke suggested that the central bank may slow its bond-buying program this year and ultimately end it next year, we can assess that zinc has escaped the bloodbath. Prices remain steady as a result of four main factors: 1.London Metal Exchange zinc stockpiles sit at around 1 million metric tons (MT), down from the level of 1.2 million MT that they hit several months ago. 2.Those stockpiles are “optically high” but they are located in places that are not close to zinc-consuming centers. 3.In April, zinc production was lower than consumption “for the first time in quite awhile,” 4.Several major zinc mines have either closed or are set to close. While not everyone agrees that production lost from these mines will create a shortage of zinc supply other analysts think that will be the case. PS: Me too...
The zinc market is starting to turn towards a deficit. It’s been a long and sort of drawn out story over the last few years that the zinc market’s actually going to go into deficit. But it’s happening now. And the large zinc mine closures are happening now. We saw the first one this year where Xstrata’s Brunswick finally closed its doors. So that’s the first of many shutdowns that we predict to happen over the next 3 years eventually leading to a deficit by 2014-2015. Lower zinc price will accelerate this process especially because the construction of planned zinc mines in the current environment will be postponed.
Copper (short term)
Goldman Sachs sees copper surplus building quicker-than-expected, cuts forecasts London (Platts)--25Jun2013/557 am EDT/957 GMT The near-term prospects for the global copper market are turning increasingly bearish, with a surplus of metal building quicker-than-expected, according to Goldman Sachs which cut its price forecasts Tuesday, with the three-months outlook cropped to $7,000/mt from $7,500/mt previously.
Behind the earlier than expected surplus of the metal is the slowdown in the world's largest consuming country, China.
The recent tightening of Chinese financial conditions resulted in the bank's economists downgrading their China GDP forecasts to 7.4% from 7.8% for 2013 and 7.7% from 8.4% for 2014.
As such, Goldman downgraded its global copper consumption growth forecast for 2013 to 2.9%, from 3.8%.
"We believe the copper market is in a broader transition to a surplus market, and slower near-term demand growth in the world's biggest copper consumer is likely to close the current 'window' of physical copper tightness sooner than we previously expected," Goldman's analyst Max Layton said in a note.
The bank now forecasts a small copper market surplus of around 250,000 mt in H2 2013, with H1 2013 having been in balance to small deficit. It also sees the market heading into a 2014 surplus of some 400,000 mt.
"Given our broader outlook of a market heading into surplus with risks to global demand growth increasingly skewed to the downside, we recommend producers take the opportunity to hedge into any near-term short covering rallies," said Layton.
"While we have been forecasting a significant copper market surplus in 2014 for some time, our new H2 2013 surplus forecast suggests that the 12-month price outlook is incrementally bearish -- owing to a higher cumulative surplus," the analyst said.
The six-months outlook was shaved to $6,600/mt from $8,000/mt with 12-months down to $6,600/mt from $7,000/mt previously.
"Our new 2013 and 2014 annual average forecasts are $7,216/mt from $7,600/mt, down 5%, and $6,600/mt from $6,925/mt, 4.7% lighter. In our base case we expect substantial fundamental support to 'kick in' in the low-mid $6,000/mt range -- our 2014 forecast price low is $6,200/mt," said Layton.
The Copper Oversupply (longer term view) Jun 24 2013, 15:58
A personalised tool to help users track selected stocks. Delivering real-time notifications on price updates, announcements, and performance stats on each to help make informed investment decisions.
(20min delay)