Monday, 7 February 2011

Copper market continues to soar

Extraordinary things are happening in the world of copper. Last month, the price broke through $10,000 (£6,200) a tonne for the first time. It has continued to soar. 

  9:56AM GMT 07 Feb 2011

In London on Monday the price touched $10,122 a tonne. The effects of this astonishing rise have rippled across the world. In Britain trains have faced delays as rail companies have struggled to fix power lines that have been attacked by thieves determined to strip them of their valuable copper.
For E.On the problem of copper theft has become so acute that the power company has begun hiring former Gurkhas to guard electricity substations. Even the Church of England has been moved to decry the cost to it of fixing the damage caused when thieves target their buildings.
Behind the price rise are a variety of factors, but by far and away the leading driver is China's economic boom. In 2010, Chinese consumption of copper increased by 38pc, with the country now accounting for about one-third of total global demand.
Asian demand as a whole last year hit 10.7m tons and is expected to exceed 11m tones this year, compared to combined European and North American demand in 2011 of 5.6m tons.
Copper miners have been ramping up production to meet the growing demand, but the International Copper Study Group still expects a global supply deficit this year of 400,000 tones.

The deficit is party a result of industry cutbacks instituted in 2009 that are still limiting production capacity. At the start of 2009 the world's copper producing capacity was 19.5m tons, but by the end of the year this had dropped to 16.1m tons.
The situation has not been helped by an explosion in December at the Chilean port of Patache, one of the main sea terminals for the country's exports of copper.
As the world's largest supplier of copper - Chile produces nearly one-fifth of the global total – the disruption to the country's exports added to fears over the ability of copper supply to keep pace with demand.
Analysts point out that some of the copper demand can be replaced by aluminium, but the latter is far from a perfect substitute. Because of aluminium's lower conductivity, telephone lines made from it must be wider, making them more expensive and this is without taking into account the higher costs because of the larger amounts of the metal that are needed to make the line.
Commodities trader Religare forecasts the London Metal Exchange price of copper could reach $11,000 a ton this year and adds its value could even spike above these levels at points.
Like any booming market, copper has attracted more than its fair share of speculators as investors see the potential to make quick profits from the metal's rising value.
Exchange traded funds have been big buyers and copper-backed funds are now among the largest commodity ETFs in the market. ETFs have often been blamed by other investors for ramping up prices as retail investors chase the next big thing, adding to the upward pressure on the price.
Fears have grown that a bubble is developing in the copper market and Morningstar analyst Daniel Rohr wrote an outlook on the copper market for 2011 titled 'Memo to Copper Miners: Enjoy it while it lasts' in which he argued that the metal's price was unlikely to remain at such a high level for more than a couple of years.
Mr Rohr points out that the world's 10 largest copper miners will be producing an extra 8.2bn pounds of copper by 2015, which he thinks will lead to global supply exceeding demand, resulting in a fall in the metal's price.
"How much copper will be world need in 2015? In our view, not enough to absorb all the additional supply, which is why we expect copper prices to decline toward the marginal cost of production," he wrote.
Commuters, electricity suppliers and the Church will be hoping that Mr Rohr is right and the copper price does fall back to a more normal level in the near future, bringing an end to the copper-stripping epidemic.
If he is wrong, then they are likely to be in for several more years of disruption as thieves continue to try and profit from the metal's sky-high price and relative scarcity.

Saturday, 1 January 2011

Copper Ends 2010 On New Record, Gains 33% On Year

NEW YORK (Dow Jones)--Copper ended 2010 at an all-time record, locking in a near 33% gain on the year amid dollar weakness and thin trading volumes.
The most actively traded copper futures contract, for March delivery, settled up 1.9%, or 8.45 cents, at $4.4470 a pound, a record settlement price. The contract also set an intra-day high of $4.4520.
Thinly traded January copper was up 1.9%, or 8.3 cents, at $4.4395 per pound on the Comex division of the New York Mercantile Exchange.
Copper prices drew strength from a weaker dollar, which eased versus the euro on the final day of the year. This is a continuation of a trend seen for much of the year. Commodities such as copper are dollar-denominated, so it is easier for buyers using foreign currencies to bid up prices when the greenback falls. The euro was recently at $1.3358, compared with $1.3295 late Thursday.
Copper's jump on Friday was exacerbated by low trading volumes. As the number of market participants falls, individual trades tends to have an outsized influence on overall prices.
"Copper's dropped into missle mode here," said Sterling Smith, analyst at Country Hedging. "The lack of people selling into it is exacerbating the rally."
Copper prices are up for a second consecutive year, though this year's gains of 32.9% are overshadowed by 2009's record gains 138.5%.
The industrial metal's record-breaking rally this year began in July as a stronger-than-expected recovery in industrial demand awakened concerns about supplies.
Analysts forecast copper consumption will outpace supply in 2011 as the global economic recovery ramps up. Copper is ubiquitous in construction and manufacturing, and is a key component in heating and cooling systems, electrical wiring and plumbing.
The International Copper Study Group forecasts a copper deficit of 435,000 metric tons in 2011. This would be the first deficit in three years, during which global copper production has averaged around 18 million tons, according to ICSG data.
Prices are expected to receive further support from the emergence of exchange-traded funds backed by physical copper. Such ETFs were created to make it easier for investors to bet on metals that have traditionally been the domain of merchant traders, miners and fabricators. Some fear that if speculative investors start to hoard copper, less will be left for commercial use, thus pushing up prices.
"We have these new ETFs coming in copper and people are front-running that expected buying," said Frank Lesh, broker and futures analyst at FuturePath Trading.
The tight supply and demand balance was underscored this November, when it emerged that one trader amassed a dominant position in London Metal Exchange copper inventories. One party currently holds between 80% and 90% of the 377,550 metric tons of copper stored in LME approved warehouses. The exchange is monitoring the trader closely but so far the position has had little impact on prices.
Declining output from established mines underpin the broader supply worries. Mines in Chile, long the world's top copper producer, are seeing their deposits exhausted. New projects are too small and few in number to make up for the shrinking volumes. In addition, the possibility of supply disruptions is fresh in the minds of market participants.
The Dona Ines de Collahuasi mine was unable to fulfill contractual obligations to ship copper following a fatal accident at its port last week. This comes shortly after the 33-day labor strike at Collahuasi, which accounts for about 3% of annual world supply.

Monday, 13 December 2010

Copper Surges to Record in London, 31-Month High in N.Y. on Chinese Demand

Copper prices climbed to a record in London and closed at an all-time high in New York after China refrained from raising borrowing costs over the weekend, bolstering speculation that metal demand will continue to rise.
Last week, China increased reserve-requirement ratios for banks by half a percentage point amid accelerating inflation. The country, the world’s largest metal user, said on Dec. 10 that imports of copper and copper products gained for the first time in three months.

“The fact that China didn’t raise rates provided optimism,” said Phil Streible, a senior strategist at Lind- Waldock, a broker in Chicago. “We’re seeing a continuation of investor buying.”
Copper for delivery in three months gained $235, or 2.6 percent, to close at $9,225 ($4.18 a pound) at 6:11 p.m. on the London Metal Exchange. Earlier, the price reached $9,248, the highest ever.
The rally will continue next year, and copper at “$10,000 is definitely in sight,” said Daniel Briesemann, an analyst at Commerzbank AG in Frankfurt.


Saturday, 16 October 2010

Investors to fuel copper surge to record

Reuters reported that copper prices are poised to hit record highs over coming months on strong fundamentals and surging investor demand which will be fuelled by new physical exchange traded products.

Investors have piled into commodities in recent weeks on expectations of further easing in the United States which will help boost growth and demand.

(Sourced from Reuters)

Copper mines would not meet demand growth - Rio Tinto - 16 Oct 2010

Saturday, 16 Oct 2010
Rio Tinto Limited said that planned copper mining projects will be unable to support demand growth at current rates and could see the market for mined copper in deficit for most of the next decade.

In slides presented at an industry conference in London, Mr Matthew Holcz GM business development of Rio Tinto Copper saw production from probable copper mining projects as only able to support annual demand growth of 3% per year by 2020.

If demand for mined copper grows at 5% per year, the market won't go back into surplus by 2020 even if all probable Greenfield projects go into production, pushing mined copper output from the current level of around 16 million tonnes to more than 22 million tonnes. Around 80% of global copper consumption comes from mined sources with the balance made up largely from scrap recycling.

In a report earlier this month, the International Copper Study Group estimated demand for the red metal will rise by 3.81% in 2010 and 4.49% in 2011.

Mr Holcz said that less than half of the world's copper supply in 2020 will come from low risk regions compared to nearly two thirds in 2000. High risk regions will account for 9% of global supply. Ore grades will also continue to decline toward 1% contained copper although at a slower rate to 2020 than over the past few decades while major new copper discoveries are increasingly deep below the surface.

Copper is seen as a barometer of global economic health but its rise to the highest levels since July 2008 has come despite renewed concerns around global economic growth.

Analysts believed that the weakening US dollar which raises the cost of dollar denominated commodities concerns about the performance of paper currencies and expectations of a supply deficit from next year have driven the metal's rise. Three month copper futures traded on the London Metal Exchange were USD 8,340 per tonne at 0015 GMT.

Average per person consumption of the metal will rise from around USD 12 to around USD 16 by 2020, Rio Tinto estimates. Consumption in developed economies plateaus around the USD 25 per head level.

Wednesday, 13 October 2010

Copper hits 2-year high on bullish miners

By Javier Blas and Jack Farchy in London

Published: October 12 2010 19:01 | Last updated: October 13 2010 09:59

Copper miners will struggle to meet soaring demand in 2011, the world’s two largest producers have warned, painting a bullish picture for the metal, which many senior traders and investors expect will reach a record within the next year.
Their upbeat comments, in video interviews with the Financial Times, came as copper prices this week hit a two-year high. In early trading at the London Metal Exchange, copper for delivery in three months hit of $8,415 a tonne on Wednesday, up 1 per cent.
The price of the metal, used widely in manufacturing, has risen nearly 40 per cent since early June and is within striking distance of the record of $8,940 set in mid-2008.

“The price will be strong because supply is challenged and demand will continue to be strong,” said Richard Adkerson, chief executive of US-based Freeport-McMoRan Copper and Gold , the world’s largest listed copper miner.


Wednesday, 13 January 2010

Copper rises as China optimism returns

Hopes about long-term prospects reassert themselves day after country tightened monetary policy
Copper (HG-FT) closed up Wednesday as optimism about China's long-term growth prospects replaced fears from a day earlier stemming from the big Asian consumer's surprise monetary tightening.