That's my opinion, for what it is worth. It is clearly not shared by everyone.
Copper Panic and Recovery
As a metal heavily dependent on prevailing sentiment and consensus economic outlook in the best of times, it shouldn’t be surprising that copper was hit abnormally hard in the worst of times. By the time the dust from the panic settled in late December 2008, copper had plummeted 68.6% to $1.28 per pound! Such an epic decline in copper was unheard of.
It was only unheard of for those people who didn't listen to charts dating back to the Great Depression. According to the USGS, copper fell 68.3% from an average price of $405 per metric ton in 1929 to an average price of $128 per metric ton in 1932. Keep in mind these are just averages. Copper no doubt fell much more than that from the highest price in 1929 to the lowest price in 1932.
And Chinese GDP is actually growing despite the panic! In the year ending Q2 2009 that obviously straddled the stock panic, Chinese GDP actually grew by an amazing 7.1%! Chinese copper imports this year have risen to records in some months. Given the state of the world economy, copper demand (and hence prices) is likely to be far closer to pre-panic levels than the panic lows going forward.
As I've said before, I do not believe in the China story (at least in the short-term and mid-term). I've warned of the China story many times in the past on this blog (even before it crashed). Every instinct I have (mostly originating from my gut) tells me that China must be hurting at least as bad as we are right now. Their biggest customer (us) came to a screeching halt.
Copper was not falling because there was any fundamental reason for it to, but simply because traders were scared.
Yeah, right. No fundamental reason for copper to fall. If you believe that I have some excellent oceanfront property in Kansas I'd like to sell you.
Copper In The Home
An average single-family home uses 439 pounds of copper.
Copper In Transportation & Industry
There's more than 50 pounds of copper in a typical U.S.-built automobile: about 40 pounds for electrical and about 10 pounds for nonelectrical components.
If you just bought a new home and a new car, then you've also just bought about 500 pounds of copper. Better keep up the pace! I'm told copper is going back to pre-panic levels!
Look at that first chart in the first link. There's something on it I would like to point out.
"Still Low Relative to Trend"
Which trend might that be?
The "Pre-Panic Up Trend" of course. We'll be back on that global unsustainable trend before you know it. Kansas I'm telling you. Ocean front property!
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Mark,
ReplyDeleteI was just messing with you last night. I have a copper story:
Way back in 1989 my Dad had a side job switching an electric railroad over to plain rails. All the huge copper conduits had to be removed. The owner of the rail yard did not say anything about those, so my Dad and I cut off all the conduits with torches and saved them up. We brought about 400 lbs of these things down to the metal recycyling plant and we got $30! I was like "all that work and all we get is $30!"
GYSC,
ReplyDeleteWhew! Here I was sitting at my computer. Nothing at all out of the ordinary. Enjoying my new bronze foil hat (tin and copper) while thinking about our country's massive spending problems. And then suddenly, I'm asked if I'm okay?
You can imagine my confusion!
"We brought about 400 lbs of these things down to the metal recycyling plant and we got $30!"
I bet you could make more money selling the T-Shirts though!
"I recycled 200 lbs of copper scrap and all I got was this lousy T-Shirt!"
Seriously. Set up a van right outside the recycling plant. Charge $15. I bet you could make a killing.
I actually sold T-Shirts at MacWorld one year. We were there to sell software but the T-Shirts were far more popular. Pretty much the same price and they did not require a 10 minute sales pitch, lol.