June 26, 2013

THE MALTHUSIANS ARE ALWAYS WRONG:

Bottom Is Falling Out of Copper Prices (LIAM DENNING, 6/25/13, WSJ)

Copper spent much of the period from 2005 to 2012 at levels at least double the marginal cost of production, according to Deutsche Bank, DBK.XE +1.94% reflecting persistent supply deficits. The number of days of consumption covered by copper stocks fell from more than 60 in 2003 to less than 20 by 2008.

The market has now loosened. Already, the stock-to-consumption ratio is back up to almost 50. On the demand side, China's attempted shift away from economic growth predicated on breakneck construction--with good reason, as the country's recent credit crunch demonstrates--will cause copper-consumption growth to level off.

And more copper is becoming available. Between 2005 and 2012, disruptions such as strikes took the equivalent of between 5% and 8% of global mine supply off the market, according to Macquarie. So far this year, though, disruptions equate to about 2%. Moreover, an earlier surge in investment brought on by higher copper prices is starting to bear fruit.

Deutsche Bank and Macquarie expect copper supply between 2013 and 2015 to exceed demand by an average of roughly 500,000 metric tons a year--higher than the surplus in 2009, when the average price fell 26%.

Posted by at June 26, 2013 4:58 AM
  

blog comments powered by Disqus
« SO MUCH DONE, SO MUCH YET TO DO: | Main | IT'S TOO ORGANIC TO EVER BE TRULY FINISHED: »