Can Copper Withstand Ailing U.S. Economy?
Source: Copper Investing News, Leia Toovey (6/9/11)
"Copper report forecasts worldwide demand at 24.82 Mt. by 2015."
Copper prices have had a wild ride in 2011, reaching record highs in February. Since then, copper has faced some headwinds—U.S. macroeconomic data suggests the second-largest copper consumer's recovery is stalling and other monetary-tightening attempts by top consumer, China, are taking effect, stoking fears that its commodities demand will drop.
Copper's ascent after the recession began on the back of China's aggressive metal-stockpiling purchases, which eroded copper stockpiles that built up during the recession and nudged copper forward, toward a recovery (despite the anemic U.S. recovery). As China's purchases gained steam, the market's focus turned to a supply deficit, adding extra impetus to the upswing. With declining supplies from aging mines and growing demand, copper is projected to be in a supply deficit over the coming years, which is part of the reason it was able withstand the commodities selloff that followed Japan's earthquake and tsunami. The quake was expected to offer a further tightening in the supply chain, as Japan's reconstruction efforts will boost its copper requirements.
The biggest concerns surround the U.S. economy. Shock waves first hit the U.S. back in April when Standard & Poor's revised its U.S. credit outlook to negative from stable, citing a "material risk" that policymakers may not reach agreement how to trim its large budget deficit.
It's hard to predict what impact the U.S. economy will have on prices, due to the global nature of the copper market.
A research report, Copper: A Global Strategic Business Report forecast worldwide demand at 24.82 Mt. by 2015, with most of the demand coming from Asia's developing economies. Copper demand from the Asian market, including China, India, Korea, Taiwan and Indonesia and others, is likely to race ahead at a rapid, compounded annual rate for 2007–2015.