The copper markets is in position for a strong run forward.
As the supply deficit extends and strikes continue, copper prices will rally with the global economic recovery, mine owners are concerned that labor disruptions will continue in the months to come.
Copper futures held slight gains Wednesday as traders viewed a report of steady growth in China as evidence that demand from the world’s largest metals consumer will continue to support the market.
The most actively traded contract, for September delivery, was recently up 0.3 cent, or 0.1%, at $4.3945 a pound on the Comex division of the New York Mercantile Exchange.
China’s second-quarter GDP and June industrial production both came in above market expectations, defying any concerns about a potential hard landing. They were, in turn, propelled by faster services growth and a restocking of key industrial products. With resilient underlying demand, Beijing policy makers can focus squarely on fighting inflation in the coming months. The PBOC will retain a tight monetary stance for another quarter before shifting to neutral in the fourth quarter, when we expect to see a more meaningful decline in inflation. We retain our call for two additional reserve ratio hikes and no interest rate hike for the rest of 2011.
As copper supplies become harder to come by, future labor disruptions could very likely result in mining companies becoming unable to meet their supply obligations with purchasers, which ultimately will mean a loss of earnings, but a strong rise in copper prices.
Shayne Heffernan
Shayne Heffernan oversees the management of funds for institutions and high net worth individuals.
Shayne Heffernan holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.
