- $200/month
- CPER
- Bought 15 shares today
Average Up
- Thread starter johnnyrock
- Start date
MARKETS COMMODITIES
Bets on Economic Rebound Push Copper Prices to Record High
Industrial-metal prices have marched higher for over a year, one reason why some investors are girding for higher inflation
By Joe Wallace
Updated May 7, 2021 3:29 pm ET
Copper prices climbed to record highs for the first time in more than a decade Friday, fueled by bets on a U.S.-led global economic rebound that would boost demand for metals used in manufacturing and construction.
Copper futures on CME Group’s Comex in New York rose 3.2% to $4.75 a pound, eclipsing their previous peak just below $4.63 from early in 2011. On the London Metal Exchange, copper to be delivered in three months rose to $10,417 a metric ton, surpassing its previous all-time closing high of $10,160 from February 2011.
Prices for base metals such as copper and aluminum have marched higher since tumbling at the onset of the pandemic in early 2020. Demand for goods among consumers unable to spend money on travel or meals out, disruption at South American mines due to Covid-19 and difficulties shipping material around the world have all contributed to the rally.
Now some investors are betting that infrastructure spending and the widespread distribution of vaccines in the U.S. will goose the world economy, lifting demand for industrial commodities even as coronavirus remains rampant in many low and middle-income countries. Adding to the excitement, analysts expect copper to be consumed in huge quantities as governments seek to wean the power and transportation sectors off fossil fuels.
Copper prices are likely to rise to between $11,500 and $12,000 a metric ton over the next few months largely because of the economic recovery in the West, said Luke Sadrian, chief investment officer at Commodities World Capital LLP, a London-based hedge fund. He expects further gains over the next five years given the rising demand for copper in electric-car infrastructure and other new uses of the metal.
Still, it could be a bumpy ride ahead. “It’s a bull market, but [we] need to watch for speculative excesses,” Mr. Sadrian said.
Soaring prices for metals and other commodities have prompted investors to gird for an acceleration in inflation. The booming U.S. housing market has fed a frenzied climb in lumber prices. Corn futures have shot up about 50% this year in Chicago, in part due to dry weather in agricultural powerhouse Brazil.
Strong demand for steel during peak construction season in China pushed prices for iron ore above $200 a dry metric ton for the first time this week, according to S&P Global Platts. And West Texas Intermediate crude-oil prices have advanced 34% to about $65 a barrel. That is helping to lift the average price of gasoline at the pump in the U.S. toward $3 a gallon, data from GasBuddy show.
“We’ve seen a lot of commodities at record highs,” said Wenyu Yao, senior commodity strategist at ING Groep. “The risk that inflation could be more persistent: that is pushing some investors to buy commodities particularly as real assets, as an inflation hedge.”
The latest available inflation data in the U.S. show consumer prices jumped 2.6% in the year ended March, reflecting temporary factors as well as a revival in purchases of many goods and services. Surveys of manufacturers show they are struggling to keep up with demand amid shortages of basic materials and parts on top of rising commodity prices.
However, government and Federal Reserve officials have played down the risk of a prolonged acceleration in inflation. “I don’t think there’s going to be an inflationary problem, but if there is, the Fed can be counted on to address it,” Treasury Secretary Janet Yellen said Tuesday.
The rise in the copper price has boosted those miners who dig for this metal. Shares in Freeport-McMoRan Inc., the U.S.’s largest miner by market value, are up nearly 70% this year. Other copper miners to get a boost include First Quantum Minerals Ltd. and Antofagasta PLC. Large diversified miners with copper projects in their portfolios, like Glencore PLC and BHP Group Ltd. , have also fared well.
The rally in metal prices in 2021 is unusual in that it hasn’t been driven by China, which accounts for about half of global demand for refined copper. The world’s second-largest economy imported record quantities of copper in 2020 as it recovered from the shock of the coronavirus, but has been exporting some copper this year, said Ms. Yao. Some manufacturers in the country have cut back on copper purchases, put off by higher prices, she added.
In one sign that the rally has been driven by Western demand, copper prices in Shanghai have fallen to a discount to those in London, encouraging the export of metal from China.
—Alistair MacDonald contributed to this article.
Write to Joe Wallace at Joe.Wallace@wsj.com
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Bets on Economic Rebound Push Copper Prices to Record High
Industrial-metal prices have marched higher for over a year, one reason why some investors are girding for higher inflation
By Joe Wallace
Updated May 7, 2021 3:29 pm ET
Copper prices climbed to record highs for the first time in more than a decade Friday, fueled by bets on a U.S.-led global economic rebound that would boost demand for metals used in manufacturing and construction.
Copper futures on CME Group’s Comex in New York rose 3.2% to $4.75 a pound, eclipsing their previous peak just below $4.63 from early in 2011. On the London Metal Exchange, copper to be delivered in three months rose to $10,417 a metric ton, surpassing its previous all-time closing high of $10,160 from February 2011.
Prices for base metals such as copper and aluminum have marched higher since tumbling at the onset of the pandemic in early 2020. Demand for goods among consumers unable to spend money on travel or meals out, disruption at South American mines due to Covid-19 and difficulties shipping material around the world have all contributed to the rally.
Now some investors are betting that infrastructure spending and the widespread distribution of vaccines in the U.S. will goose the world economy, lifting demand for industrial commodities even as coronavirus remains rampant in many low and middle-income countries. Adding to the excitement, analysts expect copper to be consumed in huge quantities as governments seek to wean the power and transportation sectors off fossil fuels.
Copper prices are likely to rise to between $11,500 and $12,000 a metric ton over the next few months largely because of the economic recovery in the West, said Luke Sadrian, chief investment officer at Commodities World Capital LLP, a London-based hedge fund. He expects further gains over the next five years given the rising demand for copper in electric-car infrastructure and other new uses of the metal.
Still, it could be a bumpy ride ahead. “It’s a bull market, but [we] need to watch for speculative excesses,” Mr. Sadrian said.
Soaring prices for metals and other commodities have prompted investors to gird for an acceleration in inflation. The booming U.S. housing market has fed a frenzied climb in lumber prices. Corn futures have shot up about 50% this year in Chicago, in part due to dry weather in agricultural powerhouse Brazil.
Strong demand for steel during peak construction season in China pushed prices for iron ore above $200 a dry metric ton for the first time this week, according to S&P Global Platts. And West Texas Intermediate crude-oil prices have advanced 34% to about $65 a barrel. That is helping to lift the average price of gasoline at the pump in the U.S. toward $3 a gallon, data from GasBuddy show.
“We’ve seen a lot of commodities at record highs,” said Wenyu Yao, senior commodity strategist at ING Groep. “The risk that inflation could be more persistent: that is pushing some investors to buy commodities particularly as real assets, as an inflation hedge.”
The latest available inflation data in the U.S. show consumer prices jumped 2.6% in the year ended March, reflecting temporary factors as well as a revival in purchases of many goods and services. Surveys of manufacturers show they are struggling to keep up with demand amid shortages of basic materials and parts on top of rising commodity prices.
However, government and Federal Reserve officials have played down the risk of a prolonged acceleration in inflation. “I don’t think there’s going to be an inflationary problem, but if there is, the Fed can be counted on to address it,” Treasury Secretary Janet Yellen said Tuesday.
The rise in the copper price has boosted those miners who dig for this metal. Shares in Freeport-McMoRan Inc., the U.S.’s largest miner by market value, are up nearly 70% this year. Other copper miners to get a boost include First Quantum Minerals Ltd. and Antofagasta PLC. Large diversified miners with copper projects in their portfolios, like Glencore PLC and BHP Group Ltd. , have also fared well.
The rally in metal prices in 2021 is unusual in that it hasn’t been driven by China, which accounts for about half of global demand for refined copper. The world’s second-largest economy imported record quantities of copper in 2020 as it recovered from the shock of the coronavirus, but has been exporting some copper this year, said Ms. Yao. Some manufacturers in the country have cut back on copper purchases, put off by higher prices, she added.
In one sign that the rally has been driven by Western demand, copper prices in Shanghai have fallen to a discount to those in London, encouraging the export of metal from China.
—Alistair MacDonald contributed to this article.
Write to Joe Wallace at Joe.Wallace@wsj.com
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- Message for those who stumble on to this thread
I had been buying small amounts of WEAT every month, because I fully believe we are in mania territory with alt coins, tech stocks and the overall market.
After seeing that there is absolutely zero interest in copper that is sitting at all time highs (the metal itself), every radio DJ is touting alt coins and Robinhood, and the massive influx of newly created money into the system, I decided to buy what I can and average up.
I'll post weekly charts of CPER, and update the status of any purchases.
- CPER (copper ETF) is holding up relative to the other commodity ETFs
- As of 3:35 on Friday
- 15 shares
- Weekly Chart
- CPER
Via ZH:
Authored by Bill Blain via MorningPorridge.com,
“You thought polarization and conspiracy theories were bad before corpses started reanimating and eating folks?”
The world looks poised on the edge of a synchronous recovery on pandemic recovery, climate-change, renewables and infrastructure investments. It will fuel a massive commodities supercycle, but is not without danger in terms of currency confidence and debt risks. A key proxy will be copper – which could rally strongly, yet still looks cheap in dollar terms. However, the growing sense of fractured political polarisation and gridlock in the US suggests substantial dollar depreciation.
This morning’s Porridge is bound to upset my chums across the Pond.. Nothing infuriates ‘Muricans as much as criticising their politics, or suggesting the Earth’s economy might not revolve around them… but this blog is about market strategy, not pleasing Trump supporters.
The first part of this morning’s trade is simple – buy into global recovery. Post-Pandemic the Global Economy is set for synchronistic growth, fuelled by governments everywhere inflating their economies through new fiscal spending programmes. Growth since 2008 remained anaemic on the back of misguided government austerity policies. Growth post 2020 is going to be hyper-accelerative on the back of new fiscal freedoms Governments have found to spend, spend, spend! (Nothing upsets liberty loving libertarians as much as government spending programmes’ wastefulness, or the abuse of the currency they perceive.)
Since March 2020, government borrowing has ballooned to pay for immediate Pandemic relief and furlough schemes. It happened, and the skies did not fall upon us. Next up will be massive infrastructure, climate change/environment, health and education programmes on a scale we’ve never, ever seen before. Since every government is doing it, what’s the worry….? (Rhetorical question….)
All that spending is going to drive a massive commodities uptick; the super-cycle everyone is so excited about. Already we’re seeing key construction commodities rise. A key proxy beneficiary will be copper. The world functions on electricity, and you can’t pour a gallon of four-star volts into an EV without copper cables….
But.. and here’s an interesting thought – which was spotted by my colleague Julian Wheeler: at over $10000, copper is back to the record levels it last achieved in 2011, when the dollar was relatively weak at 75 on the DXY dollar index. Today copper is some 15% undervalued compared to its value of the dollar around 90. On the back of the rising demand metrics for copper, I fully expect it will continue to rise in price (Goldman has a $15k target), but is also likely to make significant gains relative to the dollar – which is likely to continue its recent slide.
Hence the trade – Buy Copper on the back of global synchronous growth…. But sell dollar?
Conventionally, you would sell a currency because of its overly-row interest rate, or concern about its credibility and rising debt. Both apply to the US. The FED has committed to low rates despite the like pandemic recovery – justified on the basis the economy will stage a brief recovery spike before calming back down to pre-pandemic activity levels. US Debt has expanded to pay the costs the pandemic programmes, and now will have to fund whatever programme Biden can push through. Every other major economy is furiously printing money… so why would the US suffer more than any other?
I’ll come back to further reasons to sell the dollar… but they are host of reasons to expect copper to rise; the demand for the kind of new “smart, connected” infrastructure every government had on its wish list, the need to replace and evolve national grids as renewable power becomes more important, and the replacement of carbon unfriendly internal combustion engine cars by electric is all significant. (I think I’ve quoted before that an EV used approximately 4 times as much copper (around 80kg) as an ICE auto.)
The super-cycle is not just about copper. Around the globe we’re seeing steadily growing demand for all strategic commodities. The tiny village of Hemerdon in Devon is home to the largest tungsten deposit outside China. The mine went bust a few years ago, was picked up for a few million by Tungsten West is now looking at a £100mm AIM valuation.
The big joke is that commodities analysts have predicted about 12 of the 4 commodities super-cycles that have actually occurred. It normally takes years to get a new mine into production – and in these years the boom conditions and demand that encouraged the developers to spend the money might have evaporated, meaning a load of new supply hitting the market after the top, accelerating prices falls as rising supply exceeds diminishing demand.
This time may be different. The last supercylce was largely fuelled by China’s infrastructure rebuild. This time it’s global buildout. Long-term infrastructure projects mean steady demand out over a decade or more, long-enough to drive a screed of new mine development now – which is why mining financiers and analysts are getting terribly excited.
Who knows, maybe the UK government will have a smart lightbulb moment and realise that using our own Metallurgical Coal from the mine I was trying to fund in Cumbria is better, less polluting, and more efficient than importing it from Australia or Steel from China. However, hoping for common sense from government is not something to base an investment strategy around. Hey-ho and ho-hum.
Whatever – Copper and global commodities look a solid bet..
Perhaps even more important is the second part of the bet – selling the dollar.
Why would you? The US is home to World’s largest, successful, valuable and most innovative companies. The dollar is the defacto global medium of exchange. The US president is widely acknowledged to be the most powerful man on the planet. Yet… there is something of a shadow upon the land…
As event unfold over the next 2 years into the mid-term elections, and the next full presidential cycle, the degree to which US politics is terminally broke will become increasingly apparent. Words like Gridlock, partisan, and polarisation dominate the news flow. While the rest of the globe gets on with rebuilding their economies, Biden has a short-window, and tiny majority in the House to push through his plans. He may become as irrelevant as Obama after the next vote.
I’ve been trolled many times for daring to comment on the non-functionality of US politics. Serious fund managers tell me I understand nothing – that I massively overestimate any ongoing danger from Trump, and underestimate just how deeply Biden is plunging the US into a woke dominated parody of socialism. As a global market strategist, I don’t particularly care about the politics, I just need to look at events and draw conclusions as to how investible the US looks on a relative basis? (For the record, I will state most Americans are wonderful people – until you start talking politics, at which point they tend to shed perspective..)
Can the Democrats turn around the economy and build the physical and social welfare structures a sustainable new America will require? Its’ record in the big cities is less than reassuring.
Meanwhile – can the Republicans offer a credible alternative? At the moment, the answer is no. Trump will remain an utterly destabilising feature from the bunker now that he’s conclusively demonstrated his reach and control of the party by the defenestration of Liz Cheney. The extraordinary recount in Arizona gives continued succour to Trump’s Big Lie.
Don’t take my word on how divided America is. A recent survey for USA Today found “destructive partisan devisiveness” is a huge problem. 54% of Republican voters are convinced Biden is taking them down the road to hell. 77% of Americans think the nation’s toxic political problems come from the top down, while a majority of Republicans still believe Trump was robbed of the election.
We could spend hours analysing policies and election trends, in much the same way US Sports commentators talk for hours about irrelevant data and numbers as if it actually meant anything.. The real issue for markets is where does a broken American political system put it on a relative basis to other economies?
There are massive “investibility” issues elsewhere – with Europe, the UK, or China – but these can’t be completely dismissed when the US looks likely to become even more politically dysfunctional.
Authored by Bill Blain via MorningPorridge.com,
“You thought polarization and conspiracy theories were bad before corpses started reanimating and eating folks?”
The world looks poised on the edge of a synchronous recovery on pandemic recovery, climate-change, renewables and infrastructure investments. It will fuel a massive commodities supercycle, but is not without danger in terms of currency confidence and debt risks. A key proxy will be copper – which could rally strongly, yet still looks cheap in dollar terms. However, the growing sense of fractured political polarisation and gridlock in the US suggests substantial dollar depreciation.
This morning’s Porridge is bound to upset my chums across the Pond.. Nothing infuriates ‘Muricans as much as criticising their politics, or suggesting the Earth’s economy might not revolve around them… but this blog is about market strategy, not pleasing Trump supporters.
The first part of this morning’s trade is simple – buy into global recovery. Post-Pandemic the Global Economy is set for synchronistic growth, fuelled by governments everywhere inflating their economies through new fiscal spending programmes. Growth since 2008 remained anaemic on the back of misguided government austerity policies. Growth post 2020 is going to be hyper-accelerative on the back of new fiscal freedoms Governments have found to spend, spend, spend! (Nothing upsets liberty loving libertarians as much as government spending programmes’ wastefulness, or the abuse of the currency they perceive.)
Since March 2020, government borrowing has ballooned to pay for immediate Pandemic relief and furlough schemes. It happened, and the skies did not fall upon us. Next up will be massive infrastructure, climate change/environment, health and education programmes on a scale we’ve never, ever seen before. Since every government is doing it, what’s the worry….? (Rhetorical question….)
All that spending is going to drive a massive commodities uptick; the super-cycle everyone is so excited about. Already we’re seeing key construction commodities rise. A key proxy beneficiary will be copper. The world functions on electricity, and you can’t pour a gallon of four-star volts into an EV without copper cables….
But.. and here’s an interesting thought – which was spotted by my colleague Julian Wheeler: at over $10000, copper is back to the record levels it last achieved in 2011, when the dollar was relatively weak at 75 on the DXY dollar index. Today copper is some 15% undervalued compared to its value of the dollar around 90. On the back of the rising demand metrics for copper, I fully expect it will continue to rise in price (Goldman has a $15k target), but is also likely to make significant gains relative to the dollar – which is likely to continue its recent slide.
Hence the trade – Buy Copper on the back of global synchronous growth…. But sell dollar?
Conventionally, you would sell a currency because of its overly-row interest rate, or concern about its credibility and rising debt. Both apply to the US. The FED has committed to low rates despite the like pandemic recovery – justified on the basis the economy will stage a brief recovery spike before calming back down to pre-pandemic activity levels. US Debt has expanded to pay the costs the pandemic programmes, and now will have to fund whatever programme Biden can push through. Every other major economy is furiously printing money… so why would the US suffer more than any other?
I’ll come back to further reasons to sell the dollar… but they are host of reasons to expect copper to rise; the demand for the kind of new “smart, connected” infrastructure every government had on its wish list, the need to replace and evolve national grids as renewable power becomes more important, and the replacement of carbon unfriendly internal combustion engine cars by electric is all significant. (I think I’ve quoted before that an EV used approximately 4 times as much copper (around 80kg) as an ICE auto.)
The super-cycle is not just about copper. Around the globe we’re seeing steadily growing demand for all strategic commodities. The tiny village of Hemerdon in Devon is home to the largest tungsten deposit outside China. The mine went bust a few years ago, was picked up for a few million by Tungsten West is now looking at a £100mm AIM valuation.
The big joke is that commodities analysts have predicted about 12 of the 4 commodities super-cycles that have actually occurred. It normally takes years to get a new mine into production – and in these years the boom conditions and demand that encouraged the developers to spend the money might have evaporated, meaning a load of new supply hitting the market after the top, accelerating prices falls as rising supply exceeds diminishing demand.
This time may be different. The last supercylce was largely fuelled by China’s infrastructure rebuild. This time it’s global buildout. Long-term infrastructure projects mean steady demand out over a decade or more, long-enough to drive a screed of new mine development now – which is why mining financiers and analysts are getting terribly excited.
Who knows, maybe the UK government will have a smart lightbulb moment and realise that using our own Metallurgical Coal from the mine I was trying to fund in Cumbria is better, less polluting, and more efficient than importing it from Australia or Steel from China. However, hoping for common sense from government is not something to base an investment strategy around. Hey-ho and ho-hum.
Whatever – Copper and global commodities look a solid bet..
Perhaps even more important is the second part of the bet – selling the dollar.
Why would you? The US is home to World’s largest, successful, valuable and most innovative companies. The dollar is the defacto global medium of exchange. The US president is widely acknowledged to be the most powerful man on the planet. Yet… there is something of a shadow upon the land…
As event unfold over the next 2 years into the mid-term elections, and the next full presidential cycle, the degree to which US politics is terminally broke will become increasingly apparent. Words like Gridlock, partisan, and polarisation dominate the news flow. While the rest of the globe gets on with rebuilding their economies, Biden has a short-window, and tiny majority in the House to push through his plans. He may become as irrelevant as Obama after the next vote.
I’ve been trolled many times for daring to comment on the non-functionality of US politics. Serious fund managers tell me I understand nothing – that I massively overestimate any ongoing danger from Trump, and underestimate just how deeply Biden is plunging the US into a woke dominated parody of socialism. As a global market strategist, I don’t particularly care about the politics, I just need to look at events and draw conclusions as to how investible the US looks on a relative basis? (For the record, I will state most Americans are wonderful people – until you start talking politics, at which point they tend to shed perspective..)
Can the Democrats turn around the economy and build the physical and social welfare structures a sustainable new America will require? Its’ record in the big cities is less than reassuring.
Meanwhile – can the Republicans offer a credible alternative? At the moment, the answer is no. Trump will remain an utterly destabilising feature from the bunker now that he’s conclusively demonstrated his reach and control of the party by the defenestration of Liz Cheney. The extraordinary recount in Arizona gives continued succour to Trump’s Big Lie.
Don’t take my word on how divided America is. A recent survey for USA Today found “destructive partisan devisiveness” is a huge problem. 54% of Republican voters are convinced Biden is taking them down the road to hell. 77% of Americans think the nation’s toxic political problems come from the top down, while a majority of Republicans still believe Trump was robbed of the election.
We could spend hours analysing policies and election trends, in much the same way US Sports commentators talk for hours about irrelevant data and numbers as if it actually meant anything.. The real issue for markets is where does a broken American political system put it on a relative basis to other economies?
There are massive “investibility” issues elsewhere – with Europe, the UK, or China – but these can’t be completely dismissed when the US looks likely to become even more politically dysfunctional.
- This could just be a pullback to the 30 sma, but the plan was to average up.
- I'll start another thread if I get back in.
- The plan was to average up, and not average down.
Two points...
1. Why start a new journal thread? Just keep it in the same thread. Prevents clutter.
2. Averaging up and averaging down is the same darned thing.