The Big Story – Can Copper’s Craze Continue?

Featuring JP Moreno

Copper and the base metals have rallied strongly over the past 12 months, but how much of this market is driven by technicals, speculation and algo funds? In this ‘Big Story’ on the Base Metals, we’ll ask traders, analysts and dealmakers in the resources space, to see if copper can really count on future expected demand, or if a correction is coming.

Published on
20 November, 2017
Topic
China, Technical Analysis, Macro
Duration
29 minutes
Asset class
Commodities
Rating
23

Comments

  • SL

    Stephen L.

    24 11 2017 10:11

    10       1

    Great piece. If you could lower the level of the music a bit, that would be swell! Keep up the good work

  • VP

    Vincent P.

    22 11 2017 15:47

    0       0

    Excellent update on Dr. Copper! Can we have some inflation please??

  • M.

    Milton ..

    21 11 2017 13:59

    7       0

    Hello everyone,

    Bernd Sischka of Thomson Reuters has been so kind that he provided us with a brand new Base Metals Outook for 2017.

    Make sure you check it out on: http://financial-risk-solutions.thomsonreuters.info/GFMS

    • EK

      Emil K.

      21 11 2017 18:12

      2       0

      More Bernd Sischka please.

  • JF

    Jonathan F.

    21 11 2017 13:51

    6       0

    As a physical market participant, I have some of the below comments:
    -No talk of physical premium, albeit is low, firming up a bit
    -New projects (lack of)/low ore grade is main supply issue. Most new projects have lower ore grades than those of past, producing less copper per mined ton
    -EV demand, I think is a bit overstated, unless the demand for EV really sets is. Some high level info I am basing this on is:
    -A metals consultancy recently foretasted a 1Mt of copper consumption, coming from EV’s which include, passenger and commercial HEVs (full hybrids), PHEVs (plug-in hybrids) and BEVs (battery EV’s,) annually in 2025 and 2.6Mt in 2035*
    -The Copper Alliance sees demand go from 185K tons in 2017 to 1.74M tons in 2027

    *In 2025 copper demand is set to be 26.092MT and 29.402MT in 2035, so EV makes up/is expected to make up around 3.8% and 8.84% of total copper consumption for 2025/2035 respectively.

    I am bullish based on lack of new (economical) projects and low ore grades as well as demand in China.

    • RP

      Raoul P.

      21 11 2017 14:06

      2       0

      Interesting.What economic growth trajectory does this factor in? Its obviously very late cycle and global GDP growth will be a risk at some point relatively soon (12 to 18 months?).

    • JF

      Jonathan F.

      21 11 2017 16:22

      2       0

      These numbers are basis a growth of refined copper consumption from period 2016-2035 of 1.4%; which to your point, will obviously be affected should GDP/IP come in. Physical players see copper defect coming in in mid 2020's.

    • JF

      Jonathan F.

      21 11 2017 16:22

      1       0

      Refined copper consumption *growth*

    • JF

      Jonathan F.

      23 11 2017 20:03

      1       0

      I will lastly add that many not in the copper market do not follow, and what I find to be the most important source of demand, being copper smelters. Smelters main feed is copper raw material aka concentrates. When market participants talk about copper, they are mostly referring to to a cathode. Before cathode there are many stages, mainly turning ore into concentrates by grinding/crushing ore and then treating through a chemical/flotation process, to a large degree come from South America ie Chile/Peru) and sending the concentrates to a smelter. Here is the interesting part. The sheer amount of smelters being built in China is astounding. I dont recall specific years, I think up until 2035, but approximately 60% of all new smelter capacity is being built in China. So while copper may have ups and downs the long term view in China is the need for concentrates. Further, India is planning on adding smelter capacity to the tune of 400K metric tons, which again, primary source of feed is concatenates, frankly there are not enough concentrates to go around! Treatment and refining charges are a discussion for a different time!

  • MS

    Mario S.

    21 11 2017 00:04

    0       1

    As a generalist, great work. BHP and RIO are obvious choices, technicals in next 48 hours will prompt my decision on them, now how about a few crumbs from the industry perspective? Real Vision needs to use Real dry ice for the real video effect😘.

  • CL

    Christopher L.

    20 11 2017 21:59

    1       0

    Electric car demand? Lol.

    • HM

      Hot M.

      21 11 2017 02:34

      1       0

      If the west wont China will. Access to adequate volumes of fossil fuel can never be fully assured, despite any such given by Russia. They've been building out their high speed rail network for over a decade. They will be able to move large numbers long distances. Short distances will be covered by availability of abundant electric vehicles. They're big on solar and wind. Its a matter of national security/survival. To support this they will be building out their nuclear power network too. So, buy or dont buy a Tesla, as you like. There will be enough of a story in Asia to support the narrative, imo.

  • CL

    Christopher L.

    20 11 2017 21:58

    11       2

    I think a lot of this is BS in terms on a macro perspective. Speculators have been a huge driver of copper prices. You can follow the net-positioning on a five-year percentile, and it follows future prices quite well.

    If you want to talk about PMIs, I noted all of this year that it follows a very distinct cycle. The ramp began in late 2016 when China flooded the market with money. China PMI (and inflation pick up) ----> Europe PMI (and inflation pick up) ---> US PMI ( and inflation pick up). Copper followed.

    Then we saw China PMI ( and inflation dip) ----> Europe PMI (and inflation dip) ----> US PMI (and inflation dip).

    The crux is China. One can say that that doesn't matter. I say, what happens when China can no longer flood the markets with liquidity?

    • rm

      redwan m.

      21 11 2017 13:06

      2       0

      I totally agree with you on China. Here is a tweet i wrote on the topic : Copper prices have skyrocketed since this summer (YTD + 22%) but almost nobody wrote that the catalyst for it appears to be ONE CHINESE SPECULATOR putting up hundreds of million USD bullish bets. https://www.reuters.com/article/us-china-copper-coal/chinese-coal-miner-piles-on-bullish-copper-bets-fuelling-rally-source-idUSKBN1CT17D?rpc=401& ….

    • JF

      Jonathan F.

      23 11 2017 20:09

      1       0

      Hi Christopher, while I dont disagree about speculators, Chinese demand of concentrates grows year after year. In 2016 concentrate/ore imports into China were 28% greater than 2015, and 2017 ytd is 2% stronger than 2016. The demand for concentrates/ore is there. This ore comes from the mines, simply mines are forced to shutdown if copper price is too low. Knowing this and planned smelter capacity, I remain a bull for a few years out...I know its easy to say......

  • HJ

    Harry J.

    20 11 2017 20:52

    0       0

    Good work.
    Glad I’m able to get the perspective
    You provide!

  • jd

    john d.

    20 11 2017 20:28

    7       0

    Another great piece put forward by RV and its growing number of interviewers. Awesome stuff guys :)

    Just a quick note re RIO and BHP in relation to RR's recommended lowest risk Cu exposure - remember, you're also accepting huge iron ore exposure with these two names which would be the least bullish narrative of all the base metals due to a tsunami of seaborne supply that is coming online.

    • CS

      Charlie S.

      22 11 2017 06:04

      1       0

      Does anyone care to speculate on who the more attractive investments/names would be beyond RIO and BHP?

    • JF

      Jonathan F.

      23 11 2017 20:10

      1       0

      Southern Peru Copper is probably the purest bet on copper; I personally dont own any, but own a different US based company.

  • rr

    rlw r.

    20 11 2017 20:26

    1       0

    Excellent piece.

    In addition to Rick & Greg as go to guys, please bring Dwight Anderson back for his updated perspective!

    • GB

      Grant B.

      22 11 2017 12:09

      0       0

      Would love to hear from Simon Hunt re: China. Beat my expectations but to be fair this was a trade that started in late June/July and is now in pullback/consolidation mode as some of your guests highlight. Agree with Weldon that we are in the early stages of commodity bull. Uranium's turn now. Also gold is setting up well. It pays to do the work on the smaller names.

  • dw

    douglas w.

    20 11 2017 19:53

    5       0

    Killer vid, love to hear how Euro hedge fund peeps speak about the commodity space and then you cut to Rick and Greg & have them break it down in their style. All views were succinct and tight. Now if we can only get a tripod on JP post interview wrap up. I'm currently holding a huge short position on handheld video/camera shake.

    ps- would love to see Robert Friedland of Ivanhoe speak about this space in the future.

  • RA

    Robert A.

    20 11 2017 18:45

    20       0

    Vintage RV interview with all sides of the argument being succinctly presented. Perfect time length for this interview, IMO. I will happily allocate time to listen to Rick Rule and Greg Weldon whenever Curator Milton deems appropriate. These guys are the ultimate “no BS” guys. I thought the interviewer did a great job on this one.

  • VS

    Victor S.

    20 11 2017 17:52

    0       0

    Good interviews ...all worthwhile to hear

  • KC

    Klendathu C.

    20 11 2017 17:49

    1       0

    Fantastic.

  • JH

    Jesse H.

    20 11 2017 15:37

    9       0

    Excellent presentation, all around - like the format of multiple viewers giving different perspectives on a given market.

  • JH

    Jesse H.

    20 11 2017 15:33

    28       0

    More of Rick Rule please...he is hands-down one of the clearest, most articulate speakers I have heard on RV. I wonder if he would consider role of professor as well as CEO...seems to me he'd make a great one : )

    • EL

      Edward L.

      20 11 2017 18:37

      5       0

      second the motion

  • EL

    Elizabeth L.

    20 11 2017 15:25

    21       0

    I continue to like this format of covering a market sector with multiple views and from multiple aspects. I found this piece quite helpful. Thank You.

  • EK

    Emil K.

    20 11 2017 15:16

    19       0

    As someone in the metals market I thought this show was well done, congratulations. Rick's emphasis on the structural lack of investment is a key. With respect to copper it is very, very much a China story. Do you believe that this pace of infrastructure and manufacturing activity can be productively absorbed? Do you believe economic activity is inextricably linked to debt expansion? Do you believe that China's debt servicing capacity is limited? Do you believe Xi has gained sufficient power to redirect economic activity away from SOEs / local governments to the households and SMEs? The price / demand outlook for copper depends on how you answer those questions. Perhaps the best indicator for both bulls and bears will be whether China / Xi maintains a GDP activity target. Maintaining one is bullish, dropping it / watering it down / reformulating it to include 'happiness' would signal the opposite.

    • EL

      Elizabeth L.

      20 11 2017 15:28

      7       0

      Thank you Emil. very thought provoking questions and points.

  • PU

    Peter U.

    20 11 2017 14:28

    3       0

    good presentation, he can do another

  • PU

    Peter U.

    20 11 2017 14:10

    0       1

    copper is down -2.01% as of this release!

  • TS

    Tyler S.

    20 11 2017 14:03

    3       43

    Who are you and why are you on real vision.... ?