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Thread: Chinese to start hording Copper!

  1. #1
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    NoVA, Virginia, USA

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    Is China Hoarding Copper?
    Melinda Peer, 04.15.09, 05:30 PM EDT
    Copper prices are building on hopes that Chinese demand signals economic recovery -- don't buy it.

    Price for copper, that most utilitarian of metals are now nearing six-month highs, but investors who are hopeful this signifies an uptick in demand and is an early indicator of a global economic recovery should take caution -- China and its state run corporations are big buyers and they like to hoard for the long-term, skeptics say.

    During Wednesday's trading session copper futures on the Comex gained 4.4%, or 9 cents, to settle at $2.2075 fueled by news that warehouse copper stocks monitored by the London Metal Exchange warehouse copper stocks fell 2.4% to 480,400 metric tons. But analysts warn against interpreting dwindling stocks as clear sign of economic recovery. Furthermore, premature speculation that demand is improving could cause copper prices to corrode.

    As recent economic reports slowly show small improvements instead of the usual gloom and doom, investors seem eager to welcome signs that the battered economy is pulling out of the recession. (See "Beige Book Sees Blue Skies Ahead.") That may explain the sudden pep rally among base metal prices as the market anticipates government stimulus plans will spur construction, technology and other infrastructure projects--especially in emerging markets. Copper, the metal used in everything from electrical wires and water pipes to telecommunications and electronic products, is a popular play in times of economic recovery. And recent news that China has been importing large amounts of copper only fueled speculation that growing demand from emerging markets will drive prices on base metals.

    Investors who are interested in copper but don't want to trade futures contracts (which can be expensive) have to make due with investing in public company stocks (and taking on corporate risk in addition to commodities risk) since there isn't a pure copper exchange traded fund out there. US copper producers include: Freeport-McRoran Copper and Gold ( fcx - news - people )and Augusta Resources ( AZC - news - people ), both of which primarily operate out of Arizona. Many American copper companies operate mines overseas like Chariot Resources ( chd - news - people )which has interests in Brazil.

    But Deutsche Bank ( DB - news - people ) analyst Joel Crane doesn't think China's sudden appetite for copper signals a rebound in industrial consumption--especially since the country's stockpiling, which started as early as last November, occurred amid widespread global weakness. More likely, China, one of the globe's largest users of the metal, has been taking advantage of cheap prices to stock up on commodities for future growth.

    "In fact, the country is likely facing an oversupply situation given record high copper imports in February as well as industrial production growth slowing to its lowest level since 2001 in the first two months of the year," Crane said.

    BMO Capital Markets analyst David Radclyffe said the Chinese appetite for copper is likely to slow now that copper prices are higher.

    "Prices have recovered to current levels quicker than anticipated and on balance, shorter term view prices have the potential to retrace some of the recent gains if sentiment weakens or inventories begin to build again," Radclyffe said.

    Separately, Crane agrees that the near-term fate of copper prices could depend largely on China's reserve building.

    "We remain concerned that the threat of an end or even a wind-down of the State Reserve Bureau's program could spell trouble for copper prices," Crane said.

    Thomson Reuters contributed to this article.

  2. #2
    Regular Member Sonora Rebel's Avatar
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    Aug 2008

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    We've got copper here that ain't been dug yet. The mines are layin' off. No demand.

  3. #3
    Regular Member thx997303's Avatar
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    May 2008
    Lehi, Utah, USA

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    Not too worried about copper.

    The US has lots of copper, take for example Kennecott copper mine in Utah. You can see the darn thing from space, and they arent running out.

    Not to mention the other metals that are mined in the process. What are they, gold silver and lead?

  4. #4
    Regular Member Washintonian_For_Liberty's Avatar
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    Mercer Island, Washington, USA

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    There won't be a shortage of copper any time soon. Chile is producing more than 3 million metric tons a year..... and even if shipping stops due to oil shortages or otherwise... we have roads and railways to get the ore up to the US if we need it. Right now, between the US and Canada, we're producing nearly 1.2 million metric tons a year and no mines in the Americas are showing any sign of lessening their yield yet.
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