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A brief article today titled ‘Next bonanza eludes copper miners and strains supply’ reports research by the Copper Study Group, Brook Hunt, says the annual supply of copper may peak at around 20 million tonnes in 4 years and decline as demand rises, and that there is mounting evidence to suggest copper supply may be at greater risk unless copper prices extend their rally to record highs and beyond – thereby (I presume, as the article doesn’t say this) resulting in more copper exploration and mine development than currently is being undertaken.  The article does say that in 2008 year there was zero growth in world concentrates output, the lifeblood of the smelting and refining industry, and that London based GFMS sees a contraction of 1.6% or more this year - the first annual decline since 2002.

Click here for Research on Copper Stocks.

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To benefit to the greatest degree from this screening process readers should consider visiting the ‘Today’s News’ feature on StockResearchPortal.com each day and reviewing the headings of the articles we link to there. Readers can then efficiently link to to, and read, those articles they find of interest. Full access to this feature is available to anyone who visits StockResearchPortal.com – no Subscription sign-up is required.

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An article today titled ‘Falling inventories fuel copper’s surge’ says “copper shot through $4,500 (U.S.) a tonne to 5-month highs on Thursday after inventories fell and warehouse metal tagged for delivery rose, but dire demand prospects will cap prices”. Analysts say copper is heading for China, the world’s largest consumer because of the price premium in Shanghai over London Metal Exchange prices – about $1,200 a tonne.

It seems to me this confirms the possibility (if not likelihood) of continued growth in China - which I see as being nothing but positive for copper and other commodity metals.

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An article titled ‘Talking with the ‘King of Copper‘’ reproduces an interview with Juan Villarzu, former head of world’s largest copper company, Corporacion Nacional del Cobre de Chile and now head of Apoqunido Minerals (TSXV:AQM) recently conducted by Andrew Mickey, Q1 Publishing’s Chief Investment Strategist. The article says copper prices currently are in the order of U.S.$1.86/pound, up over 40% from December lows. During the interview Villarzu’s said (among other things):

• he was bullish on copper as early as last November because he then thought China would continue to grow at a 7% - 8% rate even if the rest of the world experienced 0% growth, and that producers would decrease production after November;

• with respect to China’s importation of a record amount of copper in February (see earlier post on this blog) the Chinese believe there will be an increase in copper consumption over time, and are accumulating stock because the price is attractive and because they expect the price of copper to rise;

• there is little information regarding the scrap market, but that it has not been a decisive factor on either the demand or supply side of the copper market;

• there is not a large quantity of copper stocks, that recently copper stockpiles have resumed their decline, and that copper inventory is limited;

• the type of development that China is experiencing is very copper intensive. This results from urban construction required to respond to the immigration from rural centers, and from more Chinese people requiring durable goods; and,

• he thinks copper will be at $2 by the end of the year, and will be above $2 next year. He does not expect the price to return to $4 but thinks the price could be in the order of $3 in 2011 or 2012.

I suggest anyone invested in, or interested in, copper explorers and producers click here and read the entire interview in context.

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An article today says “Copper rose for the first time in three days in London on speculation that China, the world’s largest consumer of the metal, will increase purchases to boost stockpiles after prices halved last year” and that amounts earmarked for withdrawal from warehouses registered with the London Metal Exchange (’LME’) have tripled to 55,025 metric tons in the past week. China’s State Reserve Bureau (’SRB’) is buying the metal, according to Scotia Capital Inc. analyst Na Liu and Macquarie Group Ltd.’s Adam Rowley.  Rowley is quoted as saying “You will definitely see more drawdown in LME stockpiles over the next few weeks. There are

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Copper prices dropped yesterday on new data showing that China’s copper imports dropped 19 percent in January from December’s numbers.  The article reporting this says:  “The drop in imports into the world’s biggest consumer of copper painted a picture of a continuing global decline in demand for the metal”.

The article is very short, and does not speak to changes in Chinese copper inventory levels that may have resulted for some of this ‘copper import’ change.  That said, while not surprising that China’s imports of copper dropped in January, 19% is a very significant drop and if this statistic is reliable, is one more thing to watch going forward as a measure of the world economic condition.  I will work to do that on this blog going forward.

Read the article by clicking here.

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Bloomberg reports this morning that:

•    crude oil rose above $40 a barrel on speculation a U.S. stimulus plan will revive demand in the world’s largest energy consumer as (an analyst quote) “The market is becoming more confident that the infrastructure packages, which are probably going to be approved this week, will have some effect” - to read click here;

•    “gold fell the most in a week on expectations the U.S. Congress will pass a smaller-than-expected stimulus package to revive the economy, easing the risk of accelerating inflation. Silver also declined” – to read click here; and,

•    copper rose in London on speculation economic growth in China will spur demand for metals, and zinc $5 to $1,190 a ton. The report then says that “Both metals pared advances after the U.S. financial recovery plan was delayed, potentially extending a U.S. recession that has reduced demand for industrial metals”. A Goldman Sachs analyst is reported to have said that he believes (paraphrased) “Zinc will be higher in 12 months at $1,235 a ton as demand holds up better than other industrial metals “given its high infrastructure-related usage, and copper will be lower at $3,200 a ton” – to read click here.

While I find these numbers interesting and monitor them daily, because I am not a day trader I am far more interested in what I think are likely to be the near and long-term trend prices.  I find some of the explanations given for intra-day and daily oil and metal price changes shallow, and frankly pay little attention to them.  However, if I were a day trader I would pay far closer attention to daily commodity pricing than I do.

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Click here to read an article titled ‘Copper Soars on Bets Government Spending Will Revive Metal Use’ published earlier today.  The article says:  “Copper prices jumped the most in almost two weeks on speculation that government spending plans worldwide will revive growth and boost demand for the metal”, and “Copper futures for March delivery soared 11.35 cents, or 7.6 percent, to $1.6135 a pound at 12:22 p.m. on the New York Mercantile Exchange’s Comex division”.

The article goes on to say that “BNP Paribas SA forecast is that China’s economic plan will boost copper demand 6.2 percent this year, and spending in the U.S. will increase use of the metal by 4.1 percent”, and “Copper also climbed this week on speculation that manufacturing may be stabilizing.  A report this week showed China’s Purchasing Manager’s Index rose in January from the previous month.”

A contrary view was expressed by Deutsche Bank, who said that copper’s gains may not be sustainable as traders are buying the metal on “overly ambitious demand expectations”.  Deutsche Bank apparently thinks copper will average $1.275 a pound this year as supplies top demand by 920,000 metric tons, compared with an average of about $3.12 in 2008.

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