Increasing Copper Inventories Below is part of a longer report yesterday from Bloomberg pointing out the possible negative effect on copper prices and some of the other base metal prices because of rising production and inventories and emerging economic slowdowns. It seems to me that copper stocks and other base metal stocks will have a hard time making much headway with such negative press and so many analysts frowning on the sector.
I suppose a lot of funds and investors follow the recommendations of these guys and adjust their portfolios accordingly. Could be that China and other countries are waiting in the bushes for lower prices, and perhaps they may get them in due time, if some of the price predictions come to pass. I wonder if CS will be able to hold its own, what with increasing production and profitablity forecast and the like.
By the way, does anyone remember how low the price of copper can go and CS still remain profitable? Seems to me I remember someone running that number but it escapes me. Thanks for the effort if you can find it.
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https://www.bloomberg.com/apps/news?pid=20601109&sid=aX2uhj_l1O5E&
refer=exclusive
Metals Evoke Bear Market as Output Gains, Funds Sell (Update1)
By Claudia Carpenter and Christopher Donville
Dec. 18 (Bloomberg) -- At the Pacorini Group warehouses in New Orleans, the 15,000 metric tons of copper that have accumulated since September are enough to wire about 7 million refrigerators and make every short-seller salivate.
``You're seeing 1,000 tons here, 1,000 tons there,'' said Mario Casciano, 40, U.S. chief executive officer of Trieste, Italy-based Pacorini. For two years, ``we used to have nothing coming in.''
That helps explain why the booming market for industrial metals may be a cropper in 2007. While everything from aluminum to zinc has risen at least 25 percent this year and as much as 157 percent, no one is forecasting a continuation of the five- year bull market.
The retreat may be abetted by rising production, a slowing economy and speculators, including hedge funds, who eight months ago began borrowing money to sell copper on the so far- successful assumption they could buy it back at lower prices, according to U.S. government data. Builders began construction of U.S. houses at the slowest pace in six years in October just as global production of copper is poised to increase 4.7 percent in 2007, more than double this year, the International Copper Study Group in Lisbon says.
Even Jim Rogers, chairman of New York-based Beeland Interests Inc., who insists the bull market in commodities will last at least another decade, now says copper prices are ``correcting'' as a U.S. recession ``slows demand for everything.''
Metals Outlook
Copper may drop 15 percent next year to $2.61 a pound on average from $3.06 this year, and probably will reach $2.10 in 2008, based on the median forecast of 11 analysts surveyed by Bloomberg. Nickel may lose 10 percent next year, while aluminum is likely to slide 13 percent, the survey shows.
ABN Amro Holding NV metals analyst Nick Moore in London expects a global surplus of 100,000 tons of copper next year, compared with a deficit of 50,000 tons in 2006. The bank forecasts aluminum production will outstrip demand by 150,000 tons in 2007, along with surpluses for lead and zinc.
The price of copper, a leading indicator of the global economy because of its use in everything from water pipes to industrial motors, may be the most vulnerable to a slump. ABN forecasts prices, which reached a record $4.04 a pound in May, will average $2.75 in 2007 and $2.25 in 2008. Copper's last drop of a similar magnitude was in 2001, after the bubble in technology stocks burst.
``Copper is going to come a cropper,'' Moore said.
(more at the URL)