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| Updated: Dec. 2, 2005 |
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Copper hit $2.17 this week and ended the week over $2 per pound. This is rarified air for copper, it has never been here before. What is the force behind this historic rise in the demand and price of copper? Many believe that the primary dark force behind the rapid increase in copper demand is the necessity of China to purchase large quantities of copper to cover huge quantities of short selling by one of the Chinese Government's metal traders, that left them with a deficit of the metal. Another possible factor in the rise of copper, is the fact that little development of new mines, and copper exploration has taken place, since it was only a couple of years ago that copper was in the $0.70/pound range, and companies were not too anxious to conduct much development or exploration for new copper mines. It can take between 5-10 years to put a large copper mine into production, from the exploration stage. And still, a globally strong economy has created demand in many parts of the globe for copper, and with the supply being relatively inflexible, the price for the available copper had to rise, and it has risen rapidly to historic levels. How broad based are the reasons for this rise? The answer to this question will determine if this is merely a peak in the demand or the beginning of a long running bull market for copper. Many think that the Chinese need for copper to cover their "short" positions will end quickly and the demand will subside to a level of below $1.50 per pound. I think it may retreat to this level, but will rise back to perhaps even greater numbers, $3, $4 per pound before the rally looses its strength. Why? Because even though the Chinese covered their short position, they will still need copper for their ever expanding economy, as will many other countries, whose economies are churning along. The US economy has many problems, itself, but these are manageable, despite what many financial experts claim. Eventually the mining companies will have production increased and demand will cool as economic rates of expansion take a breather, and the price for this electric commodity will drop back to some comfortable level. Just what this level will be will depend upon the amount of copper made available on the market and the reduced demand at that time. My guess is it will be around where it is today. |
Charles Kubach, Mine-Engineer.Com Return To The Copper Page |
