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Copper Investments are Screwed

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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.

1 Comments – Post Your Own

#1) On March 31, 2008 at 7:45 PM, dwot (75.13) wrote:

This is the kind of thing that I'm seeing all over the place, CR has a piece on China, and it show how much their stock market has declined, 43% from the peak, but it also talks about development.

There is a piece referenced that basicly says that developers have over paid for their land and now prices are weakening.

There is still a lot of exuberance in main stream media, but there are some stories out there that are real cause for concern.  There are serious afforability issues in their economy right now. 

They've been getting ready for the Olympics and I've said it a few times, I expect them to slow down. 

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