Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Ethereum EIP 1559 and Raven Coin - 21st Apr 21
Gold, USDX: The Board is Set, the Pieces are Moving - 21st Apr 21
World Economies Need to Find a Lot More COPPER! - 21st Apr 21
DogeCoin CRASH! Time to Start Mining BOODGIE Coin! Crypto Mania 2021 - 21st Apr 21
Pausing Stocks and Gold Fireworks - 21st Apr 21
Precious Metals and Miners Start of New Longer-Term Bullish Trend - P2 - 21st Apr 21
Looking For A Mortgage Broker? Here Is How To Hire One - 21st Apr 21
Amazon AMZN Stock PRIMEDAY SALE! Trend Analysis - 20th Apr 21
Stock Market Sentiment Speaks: You May Not Believe My 2021 Targets - 20th Apr 21
Stock Market Phase Two Projection - 20th Apr 21
Are Precious Metals & Miners Starting A New Longer-Term Bullish Trend? - 20th Apr 21
Inflation: First the Gain, Then the Pain… - 20th Apr 21
8 Stock Market Indicators in 1: Here's the Message of the Panic/Euphoria Model - 19th Apr 21
Gold - You Can Win a Battle, but Still Lose the War - 19th Apr 21
Will Interest Rates Rally Further Push Gold Price Down? - 19th Apr 21
Gold Fireworks Doubt the Official Inflation Story - 19th Apr 21
YuanPay Team Discuss The Process Of Crypto Diversification - 19th Apr 21
Central Banks May Ramp Up Gold Buying - 18th Apr 21
How to Get Rid of Driveway Weeds With Just WATER! 6 Months later NO Weeds, Ultimate Killer! - 18th Apr 21
State of the European Markets - DAX, FTSE, CAC, AEX, SMI, IBEX 35, S&P/MIB, Euro Stoxx 50, RTS - 18th Apr 21
Einvestment Fund: What You Need To Know About Investments - 18th Apr 21
Google Alphabet (GOOG) AI Deep Mind Stock Trend Analysis - 17th Apr 21
Stocks and Bonds Inflationary Slingshot - 17th Apr 21
Best Smartphone Selfie Stick Tripod Review by ATUMTEK Works with Samsung Galaxy and Iphone - 17th Apr 21
How to Give Budgie's First Bath | Easy Budgie Bathing and Water Training with Lettuce - 17th Apr 21
Record-breaking Decrease in New Passenger Vehicle Sale in Europe - 17th Apr 21
US Stocks Climb A “Wall Of Worry” To New Highs - 16th Apr 21
Gold’s Singular Role - 16th Apr 21
See what Anatomy of a Bursting Market Bubble looks like - 16th Apr 21
Many Stock Market Sectors Are Primed For Another Breakout Rally – Are You? - 16th Apr 21
What Skyrocketing US Home Prices Say About Inflation - 16th Apr 21
Still a Bullish Fever in Stocks? - 16th Apr 21
Trying to Buy Coinbase Stock on IPO Day - Institutional Investors Freeze out Retail Investors - 15th Apr 21
Stocks or Gold – Which Is in the Catbird Seat? - 15th Apr 21
Time For A Stock Market Melt-Up - 15th Apr 21
Stocks Bull Market Progression Now Shows Base Metal Strength - 15th Apr 21
AI Tech Stocks Buy Ratings, Levels and Valuations - 14th Apr 21
Easy 10% to 15% Overclock for 5600x, 5900x, 5950x Using AMD Ryzen Master Precision Boost Overdrive - 14th Apr 21
The Current Cannabis Sector Rally Is Pointing To Another Breakout - 14th Apr 21
U.S. Dollar Junk Bond Market The Easiest Money in History - 14th Apr 21
The SPY Is Nearing Resistance @ $410… What Is Next? - 14th Apr 21
The Curious Stock Market Staircase Rally - 14th Apr 21
Stocks are Heating Up - 14th Apr 21
Two Methods in Calculating For R&D Tax Credits - 14th Apr 21
Stock Market Minor Correction Due - 13th Apr 21
How to Feed Budgies Cucumbers - Best Vegetables Feeding for the First Time, Parakeet Care UK - 13th Apr 21
Biggest Inflation Threat in 40 Years Looms over Markets - 13th Apr 21
How to Get Rich with the Pareto Distribution - Tesco Example - 13th Apr 21
Litecoin and Bitcoin-Which Is Better? - 13th Apr 21
The Major Advantages Of Getting Your PhD Online - 12th Apr 21
Covid-19 Pandemic Current State for UK, US, Europe, Brazil Vaccinations vs Lockdown's Third Wave - 12th Apr 21
Why These Stock Market Indicators Should Grab Your Full Attention - 12th Apr 21
Rising Debt Means a Weaker US Dollar - 12th Apr 21
Another Gold Stocks Upleg - 12th Apr 21
AMD The ZEN Tech Stock - 12th Apr 21
Overclockers UK Build Quality - Why Glue Fan to CPU Heat sink Instead of Using Supplied Clips? - 12th Apr 21 -
What are the Key Capabilities You Should Look for in Fleet Management Software? - 12th Apr 21
What Is Bitcoin Gold? - 12th Apr 21
UK Covd-19 FREE Lateral Flow Self Testing Kits How Use for the First Time at Home - 10th Apr 21
NVIDIA Stock ARMED and Dangeorus! - 10th Apr 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

China’s Urban Migration Catapults Copper Prices to New Highs

Commodities / Metals & Mining Nov 08, 2010 - 05:53 AM GMT

By: Money_Morning

Commodities

Best Financial Markets Analysis ArticleDon Miller writes: The next phase of China's economic plan is fueling a relentless appetite for electricity, spiking demand for copper. That has moved investors to drive up the price of the metal, as well as the stocks of companies that mine it.

Copper has risen 14% this year, with contracts traded on the London Metal Exchange tripling since December 2008. The Bloomberg index of world mining stocks this year has climbed 16% to the highest level since Aug. 1, 2008, driven by miners like Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX), and Ivanhoe Mines Ltd. (NYSE: IVN)


"Copper is red gold," Jeremy Gray, global head of resources at Standard Chartered PLC in Hong Kong told Bloomberg News. "We're on the verge of the biggest commodities bull market we have ever see."

Gray predicts the metal could rise by 50% to $12,000 a metric ton in the next six to 12 months.

Copper turned higher in 2003 as the global economy recovered from the 2001 downturn, then slumped in 2008 as the credit crisis kicked in. The metal rebounded in the last days of 2008, and has been on a tear ever since.

The surge in prices has been sparked by a classic supply/demand imbalance, mostly driven by emerging markets - especially China.

China's is on pace to almost triple its copper consumption to 20 million tons by 2020, when it will account for 49% of world copper sales, according to CRU, a London-based mining and metals consulting firm. That's more than the world's total production today.

What's more, rising demand will create a potential global shortage of 11 million tons a year by 2035, CRU forecasts

After the 2008 financial crisis curtailed liquidity, miners pulled back on future mining projects, killing all but two that were scheduled to start by 2016, delaying 3.5 million tons of additional capacity, Gray said. He thinks demand will outstrip supply until at least 2013.

"We are looking at a copper market globally that is going to really struggle to keep up with the demand needs, and, in particular, the demand needs of China," Gayle Berry of Barclays Capital Berry told Bloomberg.

Dr. Copper - The Ultimate Economic Barometer

Copper is primarily used for industrial applications and is usually overlooked as an economic indicator.

But while gold is seen as a store of value and a hedge against a falling dollar, copper is viewed as an uncanny gauge of future global economic activity. Copper's economic sensitivity is so great, in fact, that traders often refer to it as "Dr. Copper."

While gold serves investors as a security blanket against future economic collapse, it has few practical uses other than jewelry. Copper, however is critical to the manufacturing of electronics, homes and infrastructure.

"Copper is not easily replaceable so often end users cannot substitute" for it as they can for other base metals, said Kevin Kerr, editor of Kerr Commodities Watch. "That is one of the elements that makes copper such a good gauge of real value in the industrial metals."

China' Next Phase of Development Moves to Hinterlands
China is the world's second-largest economy, but for its economy to maintain momentum the country must urbanize its mostly rural interior. More than half of China's 1.3 billion people reside in rural areas, mostly farmers and nomadic herders who live off the land.

The per-capita gross domestic product of inland provinces is less than half of that on the coast, according to data from China's National Bureau of Statistics. Overall, the government wants to quadruple per-capita GDP from 2000 to 2020.

"When politicians say China is a developing country, it's true," Wu Jian, director general of the Rio Blanco Copper SA mine in Peru, owned by Fujian province-based Zijin Mining Group Co. told Bloomberg. "It doesn't all look like Shanghai or Beijing."

Accelerating the urbanization of central and western China will push economies there to grow, Vice Premier Li Keqiang said in a speech in February.

"Boosting domestic demand and moving people into cities are priorities to maintain China's fast long-term growth," he said.

Over the next 15 years, the country will need 50,000 skyscrapers, 170 mass transit systems and urban housing for 350 million people, according to a 2009 study by the McKinsey Global Institute. That could double the domestic market for autos, appliances, televisions and other consumer goods.

"There is absolutely torrid growth taking place in central China," Daniel Rosen, a principal of the Rhodium Group, a New York-based economic advisory firm told Bloomberg. "It's going to build an Eastern China over again."

And copper is at the center of it all. The material is one of the best conductors of heat and electricity. The metal first used by man over 10,000 years ago now provides the electrical core of homes, cars, and mobile phones.

It also provides the wires and transformers that move the electricity for all those computers, dishwashers and microwaves China makes for the world and for increasingly robust domestic consumption.

China's consumption of the metal has tripled in a decade to an estimated 6.8 million tons this year, according to CRU. State Grid Corp. of China, the country's largest electricity distributor, will absorb one million tons of copper a year until 2015, according to Qu Yi, CRU's Beijing-based copper analyst.

China Reaches Out for Copper
Building all those skyscrapers and transmission lines means China's appetite for copper will be "relentless," Andrew Harding, chief executive officer of Rio Tinto PLC's (NYSE ADR: RIO) copper unit in Santiago, Chile told Bloomberg.

And China's natural supplies of the metal are dwindling fast.

China "has a relatively poor endowment of metal raw materials relative to its share in global consumption," according to Michael Widmer, a London-based metals strategist for the Merrill Lynch unit of Bank of America Corp. (NYSE: BAC). It will produce just 10% of the world's copper by the end of 2011, according to Widmer

Following the tradition of other great powers, China is reaching beyond its borders for resources as it builds the world's fastest growing economy. China's purchases of copper have poured cash into resource-rich countries like Peru and Chile.

Beijing-based Aluminum Corp. of China (NYSE ADR: ACH) bought the mineral rights in 2007 to a mountain in central Peru called Toromocho, one of the world's richest copper claims.

The $810 million purchase is just one piece of about $5 billion that Chinese companies have spent buying copper mines and deposits around the planet in the past four years.

The acquisitions will yield about 1.6 million tons of annual supply, based on data compiled by Bloomberg. China will easily consume that by the end of 2014 at its present growth rate, according to CRU's forecast.

"They're trying to lock down as much as they can, which no other government seems to be doing," Jeffrey L. Fiedler, a member of the U.S.-China Economic and Security Review Commission in Washington, told Bloomberg. "They seem not to trust the market or don't want to depend on it."

Peru is the world's fastest-growing copper producing country. Exports of iron and copper to China helped it grow its economy by almost 12% through June.

"In 30 or 40 years, this is not going to be the United States' back patio anymore," Victor Miranda, head of communications in the Peruvian ministry of foreign investment told Bloomberg. "It's going to be a projection of China."

Where to Invest in "Red Gold"
Copper prices have almost tripled on the London Metal Exchange since December 2008 despite the global recession, recently trading around $8,200 a metric ton.

Last month, BlackRock Inc. (NYSE: BLK) JPMorgan Chase & Co. (NYSE: JPM) and London- based ETF Securities Ltd. each announced exchange-traded products (ETPs) backed by copper.

BlackRock and JPMorgan have filed plans to raise as much as $1.5 billion to buy and hold the commodity. ETPs, which can be bought and sold like stocks, give investors access to commodities without having to take physical delivery.

Funds that own physical supplies may exacerbate shortages while raising prices "at an accelerated rate," Daniel Brebner, the head of metals research at Deutsche Bank AG (NYSE: DB) told Bloomberg.

If you're thinking about going for a ride on the "red gold" bandwagon there are several avenues open.

Freeport McMoran is the world's biggest copper miner and analysts like its management team and financial fundamentals.

Investing in actual copper is another way to go. You can get exposure through the iPath Dow Jones-UBS Copper ETN (NYSE: JJC) exchange-traded fund, which tracks the price of copper futures on the Comex division of the New York Mercantile Exchange.

But keep in mind that, as with all metals, a position in copper is purely speculative, since it doesn't generate any cash flows. So you'll get a return only if you sell shares after they've appreciated

If the safety of an ETF is more your cup of tea there are several choices, including Global X Copper Miners (NYSE: COPX) and First Trust ISE Global Copper Index Fund (NYSE: CU).

As is the case with all investments, do your due diligence and err on the side of caution.

Source : http://moneymorning.com/2010/11/08/...

Money Morning/The Money Map Report

©2010 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules