Although copper prices per ton have been rebounding over the last couple of days, it isn't clear as to whether or not it has really found a bottom as some think, or it still has a way to go before bottoming out.
Bank of America Merrill Lynch (NYSE:BAC) is among those that believe copper isn't close to leveling off, as it projects it to drop to about $5,000 per ton over the next year; even after plunging about 9 percent so far in 2015.
In 2014 it was down 14 percent on the year.
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Showing posts with label Copper Prices. Show all posts
Showing posts with label Copper Prices. Show all posts
Monday, July 6, 2015
Thursday, March 7, 2013
Some Copper Analysts Getting Bullish on Alleged Recovery
Some analysts believe the media reports and scattered data are representative of an real economic recovery, and see copper prices rising in the near future; possibly as early as next week.
That is contrary to hedge funds, who have betting copper prices will continue falling. They've been betting against copper since August.
According to a Bloomberg survey, of the twenty analysts queried, thirteen of them believe copper prices will rise next week. Four of them see copper falling, while the other three are neutral on copper prices in the near term.
Traders on the other hand are betting against that positive outlook, believing the price of copper will fall after moving up since November. Inventories climbing to a two-year high is the reasoning there.
Supply of copper has pressured prices downward, as they've doubled since September. Even so, Barclays (BCS) says within the next six months stockpiles will fall and shortages will return.
According to Barclays, China and North America account for 53 percent of copper demand, so how they go, overall, so will go copper. Optimistic growth estimates of 8.3 percent in the second and third quarters for China and 2.8 percent for America, may drive up the copper demand.
The question is whether this is being far too optimistic.
In the two middle quarters, Barclays sees copper demand soaring by 288,000 tons, reducing the surplus to 56,000 tons. Goldman Sachs (GS) is also bullish on copper, predicting copper will reach $9,000 in six months.
Data from the U.S. Commodity Futures Trading Commission sow traders aren't as optimistic with copper, as they hold a net-short position of 7,172 futures and options as of February 26, the highest amount since Aug. 14, compared with a net-long position of 11,413 contracts the prior week.
As measured by warehouses tracked by LME, it appears at this time that hedge funds and speculators may be closer to the truth, as inventories jumped on Wednesday to 481,225. There was a plunge in copper withdrawal orders, which dropped 68 percent since early January 2013. On March 6 they stood at a nine-month low.
Assuming the U.S. and China do grow at projected levels, the other key player in copper demand is Europe, which accounts for 17 percent of global demand. With the recession continuing there, and another year of contraction expected by the IMF, demand could dwindle significantly which would increase supply.
As usual there are mixed signals that aren't easy to interpret. But my thought is copper supply will probably continue to outpace demand, and prices in 2013 are likely to remain under some pressure.
There is simply nothing economically to suggest the global economy is growing at a pace that contradicts that high probability. Europe is really worse than is presently being reported, and it's quite possible that's the same with China and the U.S.
We need to tread carefully with copper, keeping a skeptical eye on the reports the media seem to be trying to spin so positively.
That is contrary to hedge funds, who have betting copper prices will continue falling. They've been betting against copper since August.
According to a Bloomberg survey, of the twenty analysts queried, thirteen of them believe copper prices will rise next week. Four of them see copper falling, while the other three are neutral on copper prices in the near term.
Traders on the other hand are betting against that positive outlook, believing the price of copper will fall after moving up since November. Inventories climbing to a two-year high is the reasoning there.
Supply of copper has pressured prices downward, as they've doubled since September. Even so, Barclays (BCS) says within the next six months stockpiles will fall and shortages will return.
According to Barclays, China and North America account for 53 percent of copper demand, so how they go, overall, so will go copper. Optimistic growth estimates of 8.3 percent in the second and third quarters for China and 2.8 percent for America, may drive up the copper demand.
The question is whether this is being far too optimistic.
In the two middle quarters, Barclays sees copper demand soaring by 288,000 tons, reducing the surplus to 56,000 tons. Goldman Sachs (GS) is also bullish on copper, predicting copper will reach $9,000 in six months.
Data from the U.S. Commodity Futures Trading Commission sow traders aren't as optimistic with copper, as they hold a net-short position of 7,172 futures and options as of February 26, the highest amount since Aug. 14, compared with a net-long position of 11,413 contracts the prior week.
As measured by warehouses tracked by LME, it appears at this time that hedge funds and speculators may be closer to the truth, as inventories jumped on Wednesday to 481,225. There was a plunge in copper withdrawal orders, which dropped 68 percent since early January 2013. On March 6 they stood at a nine-month low.
Assuming the U.S. and China do grow at projected levels, the other key player in copper demand is Europe, which accounts for 17 percent of global demand. With the recession continuing there, and another year of contraction expected by the IMF, demand could dwindle significantly which would increase supply.
As usual there are mixed signals that aren't easy to interpret. But my thought is copper supply will probably continue to outpace demand, and prices in 2013 are likely to remain under some pressure.
There is simply nothing economically to suggest the global economy is growing at a pace that contradicts that high probability. Europe is really worse than is presently being reported, and it's quite possible that's the same with China and the U.S.
We need to tread carefully with copper, keeping a skeptical eye on the reports the media seem to be trying to spin so positively.
Monday, February 11, 2013
Goldman: Precious Metals, Livestock to Lead Commodities Over Next Year
Goldman Sachs (NYSE: GS) predicts over the next 12 months, livestock and precious metals will lead commodities to about a 1.1 percent jump in prices.
Precious metals will climb the most according to Goldman, estimating a jump of 5 percent, while it sees livestock prices rising 4.5 percent during the same period.
In other commodity sectors, Goldman sees energy increasing 2 percent; industrial metals will drop by 1 percent; and agriculture in general will fall 3.5 percent.
“Renewed optimism has been mostly based on momentum and forward-looking survey data and far less on hard data and physical markets, which remain lackluster,” Goldman analyst Jeffrey Currie wrote in the report. “We are maintaining our price targets and recommendations and will wait for hard data and physical markets to confirm the optimism before raising estimates.”
Citing the Chinese housing completion cycle, Goldman suggest investors acquire copper. The financial giant also sees benefit in taking a position in the Brent GSCI Index in order to take advantage of the low crude inventories which has produced backwardation.
Rolling over nearby contracts to longer contracts will result in profitable returns, said Goldman.
Precious metals will climb the most according to Goldman, estimating a jump of 5 percent, while it sees livestock prices rising 4.5 percent during the same period.
In other commodity sectors, Goldman sees energy increasing 2 percent; industrial metals will drop by 1 percent; and agriculture in general will fall 3.5 percent.
“Renewed optimism has been mostly based on momentum and forward-looking survey data and far less on hard data and physical markets, which remain lackluster,” Goldman analyst Jeffrey Currie wrote in the report. “We are maintaining our price targets and recommendations and will wait for hard data and physical markets to confirm the optimism before raising estimates.”
Citing the Chinese housing completion cycle, Goldman suggest investors acquire copper. The financial giant also sees benefit in taking a position in the Brent GSCI Index in order to take advantage of the low crude inventories which has produced backwardation.
Rolling over nearby contracts to longer contracts will result in profitable returns, said Goldman.
Tuesday, February 5, 2013
Freeport (FCX) Could Soar on Copper Demand
Some analysts have questioned the sustainability of copper prices based upon the existing 82 mines that are scheduled to come online by 2020.
The problem with those assumptions is there are already significant delays of a number of those mines, and over a couple of decades there are sure to be many more. So even though there are in fact plans for 82 mines to be operating by 2020, there is no guarantee it'll come close to those numbers.
And of course that leaves 7 years of uncertainty and no guarantees as to how much copper will be available to the markets.
What also needs to be taken into consideration concerning copper supply is Escondida, the current largest producer of copper, has had production over the last five years plunge by 25 percent.
Together this produces a weak production outlook for copper in the near term, measured by a time period up to seven years, based upon projected copper mines coming online.
We must be careful not to make investment decisions based upon projections as to mine openings, which are very unstable and unreliable, rather we must look at probabilities and realities, which at this time favor growing demand and falling supply for several years.
How that plays in Freeport's favor is in recent history, 2009 - 2010, when copper prices took off, it soared from under $10 a share to almost $60 a share in that short period of time. It's likely to happen again, assuming the copper scenario plays out as expected; meaning supply is more constrained than believed by some analysts.
Another positive factor for Freeport is it is currently trading at only 7.5 times 2014 earnings. There is also the nice 3.5 percent dividend to consider.
There are those that could be rightly concerned over the recent acquisitions of Plain Exploration (PXP) and McMoRan Exploration (MMR), as the move towards diversification could water down the effect of copper prices on Freeport's bottom line. Over the long term that could be true (although the benefits of the assets coming with those acquisition are a positive for the company over time), in the short term it's unlikely to have any significant impact on the share price of Freeport, which should move in unison with the price of copper.
If the underlying assumptions are correct, that should be good news for Freeport investors.
The problem with those assumptions is there are already significant delays of a number of those mines, and over a couple of decades there are sure to be many more. So even though there are in fact plans for 82 mines to be operating by 2020, there is no guarantee it'll come close to those numbers.
And of course that leaves 7 years of uncertainty and no guarantees as to how much copper will be available to the markets.
What also needs to be taken into consideration concerning copper supply is Escondida, the current largest producer of copper, has had production over the last five years plunge by 25 percent.
Together this produces a weak production outlook for copper in the near term, measured by a time period up to seven years, based upon projected copper mines coming online.
We must be careful not to make investment decisions based upon projections as to mine openings, which are very unstable and unreliable, rather we must look at probabilities and realities, which at this time favor growing demand and falling supply for several years.
How that plays in Freeport's favor is in recent history, 2009 - 2010, when copper prices took off, it soared from under $10 a share to almost $60 a share in that short period of time. It's likely to happen again, assuming the copper scenario plays out as expected; meaning supply is more constrained than believed by some analysts.
Another positive factor for Freeport is it is currently trading at only 7.5 times 2014 earnings. There is also the nice 3.5 percent dividend to consider.
There are those that could be rightly concerned over the recent acquisitions of Plain Exploration (PXP) and McMoRan Exploration (MMR), as the move towards diversification could water down the effect of copper prices on Freeport's bottom line. Over the long term that could be true (although the benefits of the assets coming with those acquisition are a positive for the company over time), in the short term it's unlikely to have any significant impact on the share price of Freeport, which should move in unison with the price of copper.
If the underlying assumptions are correct, that should be good news for Freeport investors.
Thursday, October 14, 2010
Freeport (NYSE:FCX), BHP (NYSE:BHP), Rio (NYSE:RIO), Vale (NYSE:VALE) Soar on Rising Copper Prices
Gold prices aren't the only metal soaring on the inevitable continuation of inflationary measures by the Federal Reserve, which they now call "quantitative easing" now, as copper is the also moving up in price, and major copper miners like Freeport-McMoRan (NYSE:FCX), BHP Billiton (NYSE:BHP), Rio Tinto (NYSE:RIO), Vale SA (NYSE:VALE) are moving up in unison with it.
Copper prices today (Wednesday) increased to $8,430 a ton, the highest levels it has reached since July 2008, or for 27 months. Two-year highs have been the norm for copper since the latter part of September.
Another reason for the higher copper prices is the tightening of stock, where LME stocks have fallen 475 tons to 371,275 tons since February, a 30 percent drop.
The fall in the value of the U.S. dollar is the consequence of the misguided Federal Reserve policies, and that is the major catalyst behind the booming metals prices and upward move of the metal miners.
Copper prices today (Wednesday) increased to $8,430 a ton, the highest levels it has reached since July 2008, or for 27 months. Two-year highs have been the norm for copper since the latter part of September.
Another reason for the higher copper prices is the tightening of stock, where LME stocks have fallen 475 tons to 371,275 tons since February, a 30 percent drop.
The fall in the value of the U.S. dollar is the consequence of the misguided Federal Reserve policies, and that is the major catalyst behind the booming metals prices and upward move of the metal miners.
Tuesday, October 5, 2010
Goldman (NYSE:GS) Bumps Up Copper Price Outlook
Goldman Sachs (NYSE:GS) increased its estimates on copper prices going forward, saying shrinking concerns over macroeconomic conditions will push up prices.
Cyclical volatility was specifically cited by Goldman, saying inventories over the next five quarters will plunge, "leading to periods of extreme volatility and price spikes."
For three months, the price estimate for copper was increased from $7,900 to $8,500/mt; for six months, from $7,975 to $8,800/mt; and for 12 months, from $8,050 to $11,000/mt.
Although Goldman said they're taking profits on their long December 2010 position, they advise clients to take a new long position for the December 2011 contract.
Cyclical volatility was specifically cited by Goldman, saying inventories over the next five quarters will plunge, "leading to periods of extreme volatility and price spikes."
For three months, the price estimate for copper was increased from $7,900 to $8,500/mt; for six months, from $7,975 to $8,800/mt; and for 12 months, from $8,050 to $11,000/mt.
Although Goldman said they're taking profits on their long December 2010 position, they advise clients to take a new long position for the December 2011 contract.
Monday, October 4, 2010
BHP (NYSE:BHP) Remains Attractive to Dahlman Rose
BHP Billiton (NYSE:BHP) has garnered the attention of the financial media recently largely on their bid for Potash Corp. (NYSE:POT) and the resultant resistance to the potential acquisition from the giant fertilizer company.
But BHP has a lot of other things going on than that, as Dahlman Rose analysts recently said after they toured the South American copper assets held by the company, which have enormous upside potential for expansion.
Even so, they did note there will be huge capital expenditure to bring operations to high levels.
Mines specifically looked at by Dahlman were Spence, Antamina and Escondida, which are among the largest in the world as far as copper ore goes.
Copper prices are expected to continue climbing based on the costs mentioned, but also the shrinking ore grades. That should offer support for copper prices, but demand still plays a factor based on macroeconomic conditions, which continue to remain weak.
BHP was trading at $76.19, down $1.50, or 1.93 percent, at $1:03 PM EDT. Dahlman has a price target of $100 on BHP.
But BHP has a lot of other things going on than that, as Dahlman Rose analysts recently said after they toured the South American copper assets held by the company, which have enormous upside potential for expansion.
Even so, they did note there will be huge capital expenditure to bring operations to high levels.
Mines specifically looked at by Dahlman were Spence, Antamina and Escondida, which are among the largest in the world as far as copper ore goes.
Copper prices are expected to continue climbing based on the costs mentioned, but also the shrinking ore grades. That should offer support for copper prices, but demand still plays a factor based on macroeconomic conditions, which continue to remain weak.
BHP was trading at $76.19, down $1.50, or 1.93 percent, at $1:03 PM EDT. Dahlman has a price target of $100 on BHP.
Taseko Mines (Amex:TGB) Upgraded by Canaccord, Citing Higher Copper Prices
Taseko Mines Limited (Amex:TGB) was upgraded by Canaccord Genuity from "Hold" to "Buy," based on the projection the price of copper will increase.
"We are upgrading our rating to BUY and increasing our 12-month target price to reflect our higher near- to medium-term copper price outlook. Our revised C$6.75 target is based on a 2011E EV/EBITDA multiple of 4.0x, plus in situ value for Prosperity of $2.94 per share weighted at a 75% probability of federal permitting. The stock is rated a BUY based on the company’s leverage to copper, strong balance sheet, and attractive relative NPV valuation."
This of course doesn't include if they're given permission to proceed with their Prosperity project. It they are cleared, that could result in the stock possibly doubling in value.
Just with their producing Gibraltar copper mine the number above should be close to their future performance.
Takseko closed Friday at $5.55, gaining $0.35, or 6.73 percent.
"We are upgrading our rating to BUY and increasing our 12-month target price to reflect our higher near- to medium-term copper price outlook. Our revised C$6.75 target is based on a 2011E EV/EBITDA multiple of 4.0x, plus in situ value for Prosperity of $2.94 per share weighted at a 75% probability of federal permitting. The stock is rated a BUY based on the company’s leverage to copper, strong balance sheet, and attractive relative NPV valuation."
This of course doesn't include if they're given permission to proceed with their Prosperity project. It they are cleared, that could result in the stock possibly doubling in value.
Just with their producing Gibraltar copper mine the number above should be close to their future performance.
Takseko closed Friday at $5.55, gaining $0.35, or 6.73 percent.
Tuesday, September 28, 2010
Citigroup (NYSE:C) Says Copper Prices Could Go Either Way
Citigroup (NYSE:C) said copper is in a period of flux depending on reliable economic data and the ongoing depth and length of the weak housing market.
The giant bank said it would take "Some dramatically good economic news" to push copper above its resistance level of $8,000, although the financial institution said there's a 25 percent chance of that happening.
It's hard to see what that 25 percent chance is based upon, but we'll see.
As far a big drop in price, Citi sees that equally possible as a big jump, saying that has about a 25 percent chance of happening as well.
Dropping from five-month highs today, Citi said the probability is copper will remain level for some time until the economics play out.
Expected weak economic growth has the market believing copper will probably pull back some more, as there is nothing in housing to signal a reason that will change.
The giant bank said it would take "Some dramatically good economic news" to push copper above its resistance level of $8,000, although the financial institution said there's a 25 percent chance of that happening.
It's hard to see what that 25 percent chance is based upon, but we'll see.
As far a big drop in price, Citi sees that equally possible as a big jump, saying that has about a 25 percent chance of happening as well.
Dropping from five-month highs today, Citi said the probability is copper will remain level for some time until the economics play out.
Expected weak economic growth has the market believing copper will probably pull back some more, as there is nothing in housing to signal a reason that will change.
Friday, August 27, 2010
Freeport (NYSE:FCX) Ready to Take Off?
Some analysts have been getting very bullish on some metals company, with Freeport-McMoRan Copper & Gold (NYSE:FCX) being one of the top ones.
Their growth over the last 45 days or so is cited as a major factor, but I don't take that too seriously, as that seems to be a more arbitrary period picked, as you could start at the beginning of August and you would get a loss for the last month, while if you start at the July lows, you could say they gained about 15 percent.
No matter how one tries to spin it, in regard to the most important metals market as far as copper and aluminum, is China, and they've cut back on their consumption by 3 percent from last year, and even though they'll continue to grow, the rate is being cut down significantly from their concerns over the over-heated property market in urban areas.
So that will decrease demand for these metals in the short term, and there's nowhere else in the world that will make up for the slowdown in China.
With Freeport actually doing better than the underlying metals, even if prices increase in the second half, which is expected, they may have that already built into the price.
Commodities will continue to be strong, including metals, but it seems the companies like Freeport-McMoran which provide the commodities will continue to have a bumpy ride for the next couple of years at least, as economic data continue to confirm we're still in the midst of a lingering recession.
Their growth over the last 45 days or so is cited as a major factor, but I don't take that too seriously, as that seems to be a more arbitrary period picked, as you could start at the beginning of August and you would get a loss for the last month, while if you start at the July lows, you could say they gained about 15 percent.
No matter how one tries to spin it, in regard to the most important metals market as far as copper and aluminum, is China, and they've cut back on their consumption by 3 percent from last year, and even though they'll continue to grow, the rate is being cut down significantly from their concerns over the over-heated property market in urban areas.
So that will decrease demand for these metals in the short term, and there's nowhere else in the world that will make up for the slowdown in China.
With Freeport actually doing better than the underlying metals, even if prices increase in the second half, which is expected, they may have that already built into the price.
Commodities will continue to be strong, including metals, but it seems the companies like Freeport-McMoran which provide the commodities will continue to have a bumpy ride for the next couple of years at least, as economic data continue to confirm we're still in the midst of a lingering recession.
Monday, August 16, 2010
Freeport (NYSE:FCX) Up as Goldman (NYSE:GS) Reiterates "Overweight" on Commodities
Shares of Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) are up today as Goldman Sachs (NYSE:GS) reiterated its "Overweight" rating on commodities.
Freeport rose to $71.08, gaining $1.01, or 1.44 percent as of 2:28 PM EDT.
The dollar also fell today, helping the price of copper push up. Orders which will draw metal from stockpiles also rose to a two-month high.
Dropping almost 1 percent today was the U.S. Dollar Index, which tracks a basket of six currencies against the strength of the greenback.
Besides copper, other metals Goldman Sachs likes are gold, oil, platinum and zinc.
Freeport rose to $71.08, gaining $1.01, or 1.44 percent as of 2:28 PM EDT.
The dollar also fell today, helping the price of copper push up. Orders which will draw metal from stockpiles also rose to a two-month high.
Dropping almost 1 percent today was the U.S. Dollar Index, which tracks a basket of six currencies against the strength of the greenback.
Besides copper, other metals Goldman Sachs likes are gold, oil, platinum and zinc.
Friday, July 23, 2010
Teck (NYSE:TCK), Freeport (NYSE:FCX), Southern Copper (NYSE:SCCO) Soar on Higher Metals Prices
Teck resources (NYSE:TCK), Southern Copper (NYSE:SCCO) and Freeport-McMoRan Copper & Gold (NYSE:FCX) all performed strong on Thursday, as copper surged to its highest level in 10 weeks, and lead, aluminum, tin, nickel and zinc were all up on the LME.
On the Comex in New York, copper futures for September delivery increased by 7.15 cents to $3.1645 a pound, while on the London Metal Exchange, copper for three months delivery rose $150, to $7,010 a metric ton, or $3.18 a pound.
The U.S. dollar also plunged Thursday, helping metals prices increase.
Teck Resources ended the trading session Thursday at $35.07, gaining $1.56, or 4.66 percent. Volume was at 6,203,424, below the 3-month average.
Freeport finished the day at 68.78, gaining $2.72, or 4.12 percent. Trading volume came in at 18,854,144, a little above the 3-month average.
Southern Copper Corporation closed at $32.05 Thursday, increasing by $0.97, or 3.12 percent. volume was at 4,062,354, higher than the 3-month average of 3,219,460.
On the Comex in New York, copper futures for September delivery increased by 7.15 cents to $3.1645 a pound, while on the London Metal Exchange, copper for three months delivery rose $150, to $7,010 a metric ton, or $3.18 a pound.
The U.S. dollar also plunged Thursday, helping metals prices increase.
Teck Resources ended the trading session Thursday at $35.07, gaining $1.56, or 4.66 percent. Volume was at 6,203,424, below the 3-month average.
Freeport finished the day at 68.78, gaining $2.72, or 4.12 percent. Trading volume came in at 18,854,144, a little above the 3-month average.
Southern Copper Corporation closed at $32.05 Thursday, increasing by $0.97, or 3.12 percent. volume was at 4,062,354, higher than the 3-month average of 3,219,460.
Monday, July 19, 2010
Freeport (NYSE:FCX) Earnings Probably Lower Than Last Year
Freeport-McMoRan Copper & Gold's earnings (NYSE:FCX) for the quarter are expected to underperform last year during the same quarter, as the majority of analysts and traders are looking for about $1.31 a share from the metals giant.
Last year during the same quarter, the company generated $1.38 a share in earnings, something that most don't believe they'll be able to meet, let alone surpass.
If Freeport underperforms and is less than $1.31 a share, it'll probably take a pretty big hit, as it's been underperforming over the last week, dropping by over 8 percent during that time.
What is more interesting to me will be the guidance the company gives, as some expect copper prices demand and prices to rise, and it'll be important to see if Freeport confirms that as being a real possibility or not.
The quarterly report from Freeport will be released before the market opens on July 21st.
Last year during the same quarter, the company generated $1.38 a share in earnings, something that most don't believe they'll be able to meet, let alone surpass.
If Freeport underperforms and is less than $1.31 a share, it'll probably take a pretty big hit, as it's been underperforming over the last week, dropping by over 8 percent during that time.
What is more interesting to me will be the guidance the company gives, as some expect copper prices demand and prices to rise, and it'll be important to see if Freeport confirms that as being a real possibility or not.
The quarterly report from Freeport will be released before the market opens on July 21st.
Thursday, July 15, 2010
Goldman (NYSE:GS) Raises Base Metal Forecasts for All Except Zinc
Goldman Sachs (NYSE:GS) increased its 12-month estimates for all base metals except zinc.
Zinc was dropped to $2,225 a metric ton, a plunge of 18 percent, because of demand falling in China and Europe. China especially has a robust domestic zinc industry, and that will keep them supplied longer than originally expected by Goldman.
Goldman maintained their preference for copper, continuing to say it's their favorite metal for the long term, based on declining inventory and what they believe will be a lower supply deficit throughout the next couple of years. They see copper prices rising to $8,050 a ton, a gain of 1.4 percent.
Nickel looks really good to the financial giant, as they see it surging to about $20,00 a ton, an amazing 167 percent gain if it happens. Nickel is primarily used in stainless steel to stop corrosion, and demand largely comes from property construction, so that will be a challenge in my mind to even come close to the gains they're talking about.
Aluminum price estimates were modest, with expectations they could rise to $2,225 a ton, a 2.5 percent increase.
Silver estimates for the next twelve months were to grow by 1.3 percent, to $22.60 an ounce, mostly on their belief gold will continue to rise, looking at $1,355 an ounce there.
Zinc was dropped to $2,225 a metric ton, a plunge of 18 percent, because of demand falling in China and Europe. China especially has a robust domestic zinc industry, and that will keep them supplied longer than originally expected by Goldman.
Goldman maintained their preference for copper, continuing to say it's their favorite metal for the long term, based on declining inventory and what they believe will be a lower supply deficit throughout the next couple of years. They see copper prices rising to $8,050 a ton, a gain of 1.4 percent.
Nickel looks really good to the financial giant, as they see it surging to about $20,00 a ton, an amazing 167 percent gain if it happens. Nickel is primarily used in stainless steel to stop corrosion, and demand largely comes from property construction, so that will be a challenge in my mind to even come close to the gains they're talking about.
Aluminum price estimates were modest, with expectations they could rise to $2,225 a ton, a 2.5 percent increase.
Silver estimates for the next twelve months were to grow by 1.3 percent, to $22.60 an ounce, mostly on their belief gold will continue to rise, looking at $1,355 an ounce there.
Wednesday, July 14, 2010
Freeport (NYSE:FCX), Not Alcoa (NYSE:AA), Will Measure Economy Better
Many analysts and commentators have used the quarterly results of Alcoa (NYSE:AA) in attempts to paint the economy as rosy and recovering. Freeport-McMoRan Copper & Gold (NYSE:FCX), on the other hand, should give us a more accurate measure, as aluminum prices reveal something different, as they remain low, indicating demand remains down.
Copper is a better indicator, as it spreads across a number of industries in a much large way, and in that regard Freeport will offer a more accurate picture of how the economy is going.
But what has to be taken into consideration, as in Alcoa, is the cost-cutting measures associated with quarterly results.
While these are good steps for a company to take, and should be aggressively attacked even in the best of economic conditions, they can give a false economic indicator if you're simply measuring it by earnings per share, which while good for investors and the company, do nothing to reveal the true condition of an economy.
Demand is the bottom line, along with supply, and that will be revealed by the price of any raw material. It's as simple as that.
So when companies and economic commentators throw around all their analysis and numbers, just look at one: the price of the commodity being talked about.
If copper prices rise, that means there is increased demand which supply is having a hard time keeping up with. That is what determines the actual economic conditions, not earnings per share, which can be increased through cost-cutting measures and selling off of assets, without demand for the actual raw material increasing.
So with Alcoa, their numbers weren't related to the increase in price of aluminum, and that shows demand is still down or there's too much supply That will be the same with copper in relationship to Freeport.
If Freeport has solid earnings per share, it's because of good management in cutting costs, not because the economic conditions are improving. That assumes the price of copper remains down.
Copper is a better indicator, as it spreads across a number of industries in a much large way, and in that regard Freeport will offer a more accurate picture of how the economy is going.
But what has to be taken into consideration, as in Alcoa, is the cost-cutting measures associated with quarterly results.
While these are good steps for a company to take, and should be aggressively attacked even in the best of economic conditions, they can give a false economic indicator if you're simply measuring it by earnings per share, which while good for investors and the company, do nothing to reveal the true condition of an economy.
Demand is the bottom line, along with supply, and that will be revealed by the price of any raw material. It's as simple as that.
So when companies and economic commentators throw around all their analysis and numbers, just look at one: the price of the commodity being talked about.
If copper prices rise, that means there is increased demand which supply is having a hard time keeping up with. That is what determines the actual economic conditions, not earnings per share, which can be increased through cost-cutting measures and selling off of assets, without demand for the actual raw material increasing.
So with Alcoa, their numbers weren't related to the increase in price of aluminum, and that shows demand is still down or there's too much supply That will be the same with copper in relationship to Freeport.
If Freeport has solid earnings per share, it's because of good management in cutting costs, not because the economic conditions are improving. That assumes the price of copper remains down.
Friday, July 9, 2010
Copper Futures Prices Move Up Today
Current copper futures prices moved up to end the week, as metals in general moved up with the broader market, as temporary optimism has pervaded the market, although nothing has changed by sentiment concerning the global economy, rather the economic reality.
Either way, copper for September delivery increased 3.80 cents, or 1.3 percent, to finish at $3.0535 a pound on the COMEX metals division of the New York Mercantile Exchange.
LME copper for three-months delivery ended the day at $6,769 a ton, up from Thursday's close of $6,610 a ton.
Copper inventories have been falling, giving the impression that demand has increased, causing copper prices to rise.
Either way, copper for September delivery increased 3.80 cents, or 1.3 percent, to finish at $3.0535 a pound on the COMEX metals division of the New York Mercantile Exchange.
LME copper for three-months delivery ended the day at $6,769 a ton, up from Thursday's close of $6,610 a ton.
Copper inventories have been falling, giving the impression that demand has increased, causing copper prices to rise.
Tuesday, July 6, 2010
BHP Billiton (NYSE:BHP) Upgraded, Up on Day
BHP Billiton (NYSE:BHP) was upgraded by a couple of companies yesterday, as copper supply appears to be shrinking, and when demand picks up, they and other copper producers will benefit strongly from it.
Raising their outlooks on BHP were Independent Research GmbH and Evolution Securities.
Evolution raised BHP's rating from "Add" to "Buy," while Independent Research GmbH raised their outlook on BHP from "Hold" to "Buy."
At 1:19 PM EDT, the miner was at $64.38, up $1.67 or 2.66%. Other miners like Teck Resources (NYSE:TCK) and Rio Tinto (NYSE:RTP) were also up today on similar copper supply news.
Raising their outlooks on BHP were Independent Research GmbH and Evolution Securities.
Evolution raised BHP's rating from "Add" to "Buy," while Independent Research GmbH raised their outlook on BHP from "Hold" to "Buy."
At 1:19 PM EDT, the miner was at $64.38, up $1.67 or 2.66%. Other miners like Teck Resources (NYSE:TCK) and Rio Tinto (NYSE:RTP) were also up today on similar copper supply news.
Freeport (NYSE:FCX), BHP Billiton (NYSE:BHP), Teck Resources (NYSE:TCK), Rio Tinto (NYSE:RTP) Will Get Boost from Increasing Copper Prices
Mining companies like Freeport-McMoRan (NYSE:FCX), BHP Billiton (NYSE:BHP), Teck Resources (NYSE:TCK) and Rio Tinto (NYSE:RTP), and others with significant exposure to copper will benefit in the long term, as it's expected for demand to increase and supply to dwindle in the years ahead.
There's no doubt copper prices will remain under pressure in the near term, and there's no way of knowing when that will start to change.
But the pent-up demand for copper is still there, and when the global economy and specific economies of countries begin to rebound, copper prices will surge on the built up demand.
Much of this is based on the quality of ore being found by the miners, which has been of a lower quality. That ultimately will lead to higher copper prices because companies will have to go deeper to find higher quality copper deposits, which will require larger inputs or higher costs.
That should put the miners in a stronger position, which will allow them to increase margins. The higher costs of copper would mean nothing if the margins to get it aren't improved.
But the demand will definitely be there, and that should produce both higher copper margins, profits and prices.
There's no doubt copper prices will remain under pressure in the near term, and there's no way of knowing when that will start to change.
But the pent-up demand for copper is still there, and when the global economy and specific economies of countries begin to rebound, copper prices will surge on the built up demand.
Much of this is based on the quality of ore being found by the miners, which has been of a lower quality. That ultimately will lead to higher copper prices because companies will have to go deeper to find higher quality copper deposits, which will require larger inputs or higher costs.
That should put the miners in a stronger position, which will allow them to increase margins. The higher costs of copper would mean nothing if the margins to get it aren't improved.
But the demand will definitely be there, and that should produce both higher copper margins, profits and prices.
Thursday, June 24, 2010
Copper Prices Rising, But Not Demand
Copper prices have risen again today, the third day in a row, even after the horrendous fall in new housing starts, which industry accounts for the majority of copper demand.
Housing starts in the United States plummeted by 33 percent, the largest decline ever.
So the fact that copper prices are going up while demand is going down, tells us that there is something else going on which is driving the price besides demand.
There is of course, and that something is low interest rates, which will continue to drive down the appeal of the U.S. dollar, while driving up the prices of commodities.
This isn't to say that demand for copper won't be relevant, as it's sure to keep a damper on how high copper prices will go. But it does mean copper prices have some room to move up as money looks for a place to grow.
The result of that will bring inflation, and inflation will of course push commodity prices higher overall, even when demand is low. As I said though, demand will affect how far those prices can rise, even in a low-interest rate environment.
Housing starts in the United States plummeted by 33 percent, the largest decline ever.
So the fact that copper prices are going up while demand is going down, tells us that there is something else going on which is driving the price besides demand.
There is of course, and that something is low interest rates, which will continue to drive down the appeal of the U.S. dollar, while driving up the prices of commodities.
This isn't to say that demand for copper won't be relevant, as it's sure to keep a damper on how high copper prices will go. But it does mean copper prices have some room to move up as money looks for a place to grow.
The result of that will bring inflation, and inflation will of course push commodity prices higher overall, even when demand is low. As I said though, demand will affect how far those prices can rise, even in a low-interest rate environment.
Tuesday, June 22, 2010
Freeport-McMoRan (NYSE:FCX), Southern Copper (NASDAQ:SCCO) and Copper Demand
While everyone got excited yesterday over the decision to all the yuan to float more against the U.S. dollar, it didn't take long for the market to realize it wasn't that significant, even though precious metals like copper moved up quickly, and copper-exposed companies like Freeport-McMoRan (NYSE:FCX) and Southern Copper (NASDAQ:SCCO) plunged, after the brief euphoria left the market.
Calls also drove up the price of Southern Copper yesterday. But it's highly unlikely attempts to move the stock up by 14 percent to make a profit will work, as macro-economics simply aren't going to allow that to happen, as there's nothing out there to justify that happening, even if some temporary event or story causes some short-term optimism.
Several things are working against copper, and some of them very specific to demand. There is the Chinese property market inflation worries, which China is cooling off, and which copper demand will decline. The U.S. new housing starts are plunging as well, with the tax credit eliminated, which immediately resulted in 10 percent less starts.
Finally, there's the sovereign debt crisis in Europe, which is so bad it's impossible to know or predict how long that will last, or the real depths of the crisis.
That will keep copper demand in check for an unknown period of time, and there is little if anything that will change that in the short term, and in the long term it doesn't look much better.
Those excited about the decision of the Chinese with the yuan will need to take into account the parameters imposed upon copper and other precious metals by the ongoing recession, and the global situation is tenuous at best, with demand for raw materials far less than projected not that long ago.
Until the larger economic picture improves, Freeport and Southern Copper are going to struggle to grow. The best thing to look for there is probably buying opportunities through low price-points, with a view to the long term.
Short term there isn't much happening with these and other companies which have large exposure to the copper market.
Neither of the two companies mentioned here have done much of anything in share price since October 2009, and that's unlikely to change.
Calls also drove up the price of Southern Copper yesterday. But it's highly unlikely attempts to move the stock up by 14 percent to make a profit will work, as macro-economics simply aren't going to allow that to happen, as there's nothing out there to justify that happening, even if some temporary event or story causes some short-term optimism.
Several things are working against copper, and some of them very specific to demand. There is the Chinese property market inflation worries, which China is cooling off, and which copper demand will decline. The U.S. new housing starts are plunging as well, with the tax credit eliminated, which immediately resulted in 10 percent less starts.
Finally, there's the sovereign debt crisis in Europe, which is so bad it's impossible to know or predict how long that will last, or the real depths of the crisis.
That will keep copper demand in check for an unknown period of time, and there is little if anything that will change that in the short term, and in the long term it doesn't look much better.
Those excited about the decision of the Chinese with the yuan will need to take into account the parameters imposed upon copper and other precious metals by the ongoing recession, and the global situation is tenuous at best, with demand for raw materials far less than projected not that long ago.
Until the larger economic picture improves, Freeport and Southern Copper are going to struggle to grow. The best thing to look for there is probably buying opportunities through low price-points, with a view to the long term.
Short term there isn't much happening with these and other companies which have large exposure to the copper market.
Neither of the two companies mentioned here have done much of anything in share price since October 2009, and that's unlikely to change.
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