copper telegraphed at 16 month highThe
Telegraph, the electronic version of the U.K.’s
Daily Telegraph, reported that International Copper Study Group (ICSG) released its latest assessment of copper market.
According to preliminary ICSG data, global growth in copper demand for 2011 will exceed global growth in copper production, with a production deficit of about 200,000 metric tonnes of refined copperexpected for the year.
It is contrary to the laws of economics for prices to decline in light of a coming shortage. Markets acted irrationally and were significantly oversold. The primary reason was fear of the continuing Eurozone debt issues; fear that lack of resolution would cause another recession. Even analysts were skeptical as to when the downward trend would reverse. Michael Widmer, Metals Strategist at BofA - Merrill Lynch, was reported in the Telegraph as saying, "Factoring in also a likely stabilization of the US economy through 2012, we believe more visible upward pressure on prices will not emerge until then”. He added that he did not expect significant buying in the near future. By mid-month, after flurries of activity on the Eurozone crisis, copper prices and the prices of miners were up about 10%.
“Strong fundamentals alone will not dictate copper’s price.” Copper Investing News commentary said. The red metal will react to global macroeconomics; however, analysts say that it would take a very long and very profound recession, perhaps a depression, to alter the favorable fundamentals supporting the metal. Beyond a “prolonged recession”, neither new supply nor substitutions have the ability to alter commodities’ supply/demand fundamentals. In terms of copper, neither supply nor substitutions are likely to thwart the metal’s rally. Over the past 10 years, demand for copper has increased almost 7-fold,while it has been nearly 100 years since a significant new copper discovery. “In order to meet demand, we need to open one new major mine every year.”
While not unexpected, good news from Beijing on October 14th was enthusiastically received.
BEIJING (Commodity Online):
Chinese Copper imports rose to 380,526 tonnes in September, hitting a 16-month high. This comes at a time when copper prices have been under pressure on fears of a Chinese slowdown.
That confirms earlier reports that the Chinese may be once again start stockpiling since copper prices have fallen to attractive levels. LME copper has fallen from $9500 levels in August to trade at around $7500 currently.
Americans feel dread as copper prices fall due to the red metal’s reputation as Dr. Copper, the metal with a degree in economics and a leading indicator of global economic activity. China is much more optimistic. It sees a fall in copper prices as an opportunity to stock up on a material it will need large amounts of for many years.
Just last week, BlackRock, the world’s largest investment company made extremely bullish statements concerning not only copper but miners of other basic materials.Investments by BlackRock in mining are $35.75 billion, making it one of the world's largest single holders of the sector. Mineweb reported, Tuesday October 25, 2011 with this release from Reuters:
BlackRock Inc, the world's largest money manager, sees "massive opportunity" in oversold mining equities, the firm's resources investment division chief EvyHambro told a briefing on Tuesday. "Valuations are at very low levels," Hambro said.
Recent declines in global iron ore prices could lead to a drop in supply leading to a later upside rebound in prices, Hambro noted.
On Wednesday, October 26, 2011 the Adelaide Advertiser reported continuing discussion of the matter from Melbourne.
BlackRock gold and mining sector portfolio manager Catherine Raw said equity market nervousness was obscuring the fact that fewer high-quality mineral deposits were being discovered and those that were being found, were in higher-risk countries. Supply was also constrained because financing for new projects was getting harder to secure. She feels that supply constraints will support commodity prices over the next five or so years.
TSXV / JSP
.20 -
.24