Bloomberg: Here’s Why Everyone’s Bullish About Copperhttps://www.bloomberg.com/news/articles/2018-10-08/from-blenheim-to-blackrock-here-s-why-everyone-s-bullish-about-copper
From Blenheim to BlackRock, Here’s Why Everyone’s Bullish About Copper
The chorus of copper bulls includes big producers such as Freeport-McMoRan and hedge funds like Andurand
As the metals world descends on London this week, it seems everybody has something in common: they’re all copper bulls. Speaking ahead of the annual LME Week gathering that starts Monday, more than a dozen commodity-focused hedge funds, trading houses, producers, banks and brokers were almost unanimously positive on the near-term outlook for the metal used in pipes and wires. Metals specialists consistently pointed to the disconnect between
big-picture concerns for the economy and a rapidly- tightening physical market. It’s been a tough few months for copper. Worries about a global trade war’s effect on economic growth helped push the metal into a bear market in August and the price recovery since then has been tepid. Yet spot sales of copper to China are booming, say executives at two leading copper suppliers, reaching levels not seen for several years, and exchange inventories have fallen sharply. China Roars Premiums have surged in China while global inventories have plunged Source: SMM, LME, Comex, SHFE Copper’s got the potential to “rocket,” said David Lilley, an industry veteran who parted ways with famed fund Red Kite to set up Drakewood Capital Management earlier this year. “If everybody who’s sold it in the past three months wants to buy it back I’m not sure who’s going to sell it to them.’’ In China, physical demand for copper has been driven by a combination of lower prices and looser credit conditions, while stimulus measures are helping to unlock pent-up demand. A price differential between London and Shanghai last month also offered quick profits to importers. Copper’s longer-term outlook is also being bolstered by miners’ newfound discipline, said Evy Hambro, who manages BlackRock Inc.’s World Mining Fund. The lack of investment in new mine supply “is building up to this very strong case for the next few years,” he said in a Bloomberg Television interview. Wait for It Goldman sees “severe deficits” for copper from 2023 Source: Goldman Sachs Group Inc. Copper traded at about $6,198 a metric ton in London on Friday, for a 15 percent drop this year. Prices look set rally
through to the end of the year as fundamentals reassert themselves, according to Commodities World Capital LLP’s Luke Sadrian, who’s in the process of raising capital for a new metals fund ahead of a planned launch in the first quarter of next year. “So much of the move in copper this year has to do with the fact that it’s been seen as the poster child for the trade war,” he said. “But if you look at inventories it’s clear the market is very tight, and we haven’t seen capex
going in on the supply side, so it’s becoming the consensus that copper should move higher from here.”