dwot (99.57)

Copper Investments are Screwed

March 31, 2008 – Comments (1)

The headline I just read is that Chilli copper output is up 8% over a year ago. 

I remember over a year ago a headline read "Chinese copper output up 53%" and that was when copper took a significant dive, down to about $2.40/lb. 

I am quite surprised that copper prices are as strong as they are as copper demand has to be falling since housing starts are down in North America, Europe and if I search I'd probably find a few more housing bubbles that are also experiencing declines.

Anyway, China produces something like 1% of the world output so their increase, although massive for China, was small in terms of the world.  Chilli is the world's largest copper producer and for them to be up 8% is fairly big.  They produce about 1/3rd of the world's copper, so that is an almost 3% increase in world production from Chilli alone.  

I seriously can't see copper demand increasing right now, so increasing supply is another way to ease the price pressure and then it becomes a buyer's market and profit margins get squeezed.

Maybe 3% doesn't seem like a lot, but, if you've heard about the silver run in the late 70s, early 80s, well that was by the Hunter brothers and they took silver to what was it, $50/oz (or was it $20) by controling only 8% of the supply, or something like that.

Another story says the copper demand is booming, but I still question where it is going.  They site warehouse levels declining, but you can't see all the copper out there.