Jefferies sees strong Cu-prices later this decade Cu is by far the best of the base metals, showing increasing strenght in the corrections since the financial crises.
Fundametal support through growth in demand coupled with a struggling supply side.
https://www.metalbulletin.com/Article/3097090/Copper-prices-set-for-long-term-rise-Jefferies.html
Copper prices set for long-term rise - Jefferies
October 02, 2012
London - Analysts at Jefferies are expecting an extended period of increased copper prices, they said in a note on Tuesday October 2.
After updating their supply and demand model, they are continuing to predict a small surplus in copper up to 2015, but have said “very significant” copper deficits will emerge in the years following this.
This has led some to conclude that the copper price on the London Metal Exchange is likely to correct in the near and medium term, but the analysts do not back that view.
“We disagree, and we’d make a few points. First, barring an economic collapse, copper inventories will remain low and the role of price will be to continue to ration consumption,” they said.
“Second, the current copper price volatility has dissuaded mining managements from proceeding with high risk and high cost projects like BHP’s Olympic Dam. We expect more such cancellations.”
“Despite slower economic growth, LME copper inventories have declined to their lowest levels since the collapse of Lehman Brothers.”
Third, they added, copper prices, like equities, tend to be forward-discounting, and, as such, the prices will not correct much below an incentive price of $3.50-4.00 per lb, the Jefferies analysts believe.
“[It is becoming] clearer that the world faces a critical shortage of copper in the second half of the decade,” they said.
“After years of high prices, we believe easy substitution opportunities have already been exploited. Therefore, we remain confident that an extended period of high prices will be necessary both to ration consumption and incentivise high risk supply opportunities.”
For these reasons, US-headquartered Freeport-McMoRan Copper & Gold is their mining equities top pick for North America, thanks to its exposure to copper and its strength on the New York Stock Exchange, the analysts added.
The marked rallies in recent weeks in both equity prices at Freeport and in copper prices on the London Metal Exchange support their view, the analysts said.
“However, we still believe the level of copper price scepticism embedded in Freeport’s valuation remains far too high,” the analysts said.
Freeport’s shares were trading at $39.85 each on the NYSE at the close of trading on Monday October 1, roughly at the midpoint of their 52-week range.