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Founder Of Brook Hunt Sees Copper Peaking In Near-Term, Plunging To "Forgotten Levels" Of $1,500 By 2016

Tyler Durden's picture





 

Simon Hunt, founder of Brook Hunt, puts a dent in the dreams of all those who expect to see a continuing surge in copper prices throughout 2011 and further.  The copper specialist, who has since left the firm he founded and is now head of Simon Hunt Strategic Services which specialises in copper, global economics and China, is arguably one of the premier experts on the topic of copper. It therefore behooves the copper bulls to pay attention to his latest interim note which contains "our principal reasons why copper
prices this year won?t live up to the hopes of so many bulls." And his long-term vision is about as scary as they get: "Peak prices
for 2011  will be experienced in the first quarter of the year, if they
have not already been seen. Prices will then fall until around the start
of the fourth quarter, hitting a low of some $5500. Recovery will
follow rising parabolically in 2012 to some $14,000 by the end of next
year.  This will signal the end of the gaming of copper prices. A return to
global recession, deflation and the destruction of large end uses of
copper will see prices crashing to levels long since forgotten - to
under $1500 by 2016.
It will be at that point that the real
restructuring of the industry will take place.  Future trend growth
rates for world refined copper consumption will be below 2% a year
implying that marginal producers will be closed down. It  is not a
shortage of supply that will shape the future of copper but a shortage
of required material for furnaces
." Full note attached.

From Mineweb:

The likely pattern for copper prices in 2011 and beyond

Specialist copper analyst Simon Hunt looks to copper peaking in Q1 but fading badly thereafter, then a parabolic rise in 2012 followed by a drastic collapse 2013-2016.

This is the time of year when markets make fools of us analysts. It
is the time to guess at how copper prices will perform for the coming
year. In recent years, forecasting copper prices have become
increasingly complex because of the huge intrusion of the financial
sector into copper and other commodity markets, which has resulted in
there being established a direct correlation between equity markets, the
US$ and copper prices. 

This is a brief interim note to be followed by a detailed report
later this month, but it contains our principal reasons why copper
prices this year won?t live up to the hopes of so many bulls. 

The year started with a bang; the US$ was weak, equity markets  were
strong following encouraging data from the USA and copper prices rose to
$9750, since pulling back. However, the financial sector remains
fragile with substantial sovereign and private sector debt to be rolled
over, many in the early months of this year. 

It has been the performance of China?s economy which has driven
global growth and, on its path, equity and commodity markets. China is
now in that murky period of a leadership transition made even more
complex than usual by an avowed wish to establish  a new economic model
which would bring economic growth down to lower but sustainable levels.
In the process, domestic consumption is seen as the future driver of
economic activity with exports being given a lesser role. 

Such changes bring with them their own conflicts, conflicts between
what Beijing sees as the future and what coastal governments have
experienced as their principal source of growth. In the meantime,
notwithstanding China?s CPI data, which significantly understates real
inflation, there are real concerns within the PBOC and others by the
rising cost of living and input costs to manufacturing

Chart 1: China Corporate Goods Price

A little used series of price data, produced by the PBOC  -  and
thanks to Jim Walker for supplying this data - is the China Corporate
Goods Price Index. It is virtually a wholesale price index covering all
commodity inputs for manufacturing and others. The graph since 1999
shows just how volatile has been the index, in contrast to other indices
and GDP data. The index is now rising rapidly being 8.6% higher in
November than a year ago and quite possibly being in double digits for
December. 

Our recent report  "More on China" set out the main issues as we see
them, suggesting that money and credit will be especially tight in the
first half of this year, a result confirmed by talking with some of our
industry friends in China. This will have a significant impact on some
key copper consuming sectors - power cables, building wire and other
products sold into the construction sector. For the moment magnet wire
remains a strong market, but we think it could fade as the year
progresses. 

High copper prices and tight credit are forcing semi-fabricators and
end use industries to manage their businesses in a very prudent manner.
We now expect that China?s refined copper consumption (not demand) will
actually fall this year, led by a decline of 10% or more in power
cables, contrary to our earlier thinking. 

There are large stocks of cathode held outside the reporting system
in China. Either by dictate or credit, some of these large stocks may be
liquidated which would bring added pressure on the pricing of copper. 

There is a way of measuring how much copper is being warehoused
outside the reporting system in China. The ICSG measures China?s
consumption on an apparent consumption basis using official data on
production, imports, exports and stocks. If we then compare what we and
others think was material that actually went into furnaces then there is
a difference either

positive or negative which must reflect changes in stocks outside the
reporting system. We have not only used our own data but those of an
institution considered by many to be the best, but in recent years
producing higher consumption data than our own. Somewhere between the
two the real figures will rest. 

Bottom line: there is somewhere between 3MT and 4MT of cathode warehoused outside the reporting system in China. 

In short, China will not be the same prop to the world of copper that
it has assumed to have been in recent years. On the contrary, the
influence will be negative, certainly in the first six months. 

Outside China, economic conditions are mixed. The burst of business
activity seen in Europe last year is starting to fade with some mills
going on short-time. Exports will slow as China?s economy hunkers down
in the first few months of the year anyway. 

The US economy has given encouraging indications of recovery but
without a real recovery in housing, the current burst of consumer
spending may not be sustained. Our summary of World Refined Copper
Consumption is set out below. 

A few comments are appropriate. In 2009, China built up a large stock
of semis, around 500kt. Take that out of  the equation and world
refined consumption would have fallen by 8.3%, much more in line with
falling intensity of use and the global decline of IP. For last year,
China liquidated most of that inventory of semis (we don?t think all),
hence China?s refined consumption actually fell last year. For 2011, we
have assumed for this exercise that China?s consumption will be almost
flat on last year, though in reality it should be down by some 5%.  The
point is that world intensity of use is falling sharply at a time when
real business activity is fragile and very likely to deteriorate post
2012. 

It is against this background of a very flat trend in world real
consumption (not demand) that we need to measure the supply of refined
production. 

Refined production is  made up of three components: primary smelter
output, secondary production and SxEw. Regarding the first, we have
assumed a very flat profile for primary smelter output until 2012. This
component accounts for around 65% of refined production.

High prices have encouraged a ready supply of secondary feed to smelters and refiners. 

Last year cathode production from secondary materials rose by 20%
over 2009 and should have another large jump in 2012. SxEw output has
consistently grown faster than that of concentrate output. We have
however been cautious in its build up during this period, despite
generally high prices. 

Our refined production profile is summarised below. 

The reported stock data hides many sins. It is hardly logical, for
instance, that in 2008 and 2009, when world refined production rose by
290kt and 77kt  respectively at a time when world consumption fell by
446kt and 933kt also respectively that world stocks should rise by just
132 in 2008 and 267kt in 2009. 

China?s official data on consumption is a farce. Anyone talking to
manufacturing and fabricators in the second half of 2008 and first
quarter of 2009 will appreciate that the numbers we quote are closer to
the truth. Small mills rapidly closed down; their business was
transferred to the large mills. Even then business was weak. 

China has been used as a dumping ground for surplus material.
Throughout the second half of last year, bar a small window in October,
the arbitrage was not enough to cover costs, yet material continued to
pour into China. It is being warehoused outside the reporting system.
One day it will come out to surprise the market. 

So what does all of this analysis mean for prices? 

The first thing to understand is that prices are not being driven by
the industry. The "trade" has been sidelined by High Frequency Trading
or algorithmic trading, the Dark Pools of Liquidity and Trading Arcades.
The sophistication of these trading systems, which have nothing to do
with the industry itself, whether copper, other metals, commodities or
equities, but which catch minute discrepancies in prices, can send
prices rocketing one way or another giving the appearance of high
liquidity and volatility when in fact it is only someone with an HTF
program and a large order. 

These developments could have important structural effects on the way
that the fabricating industry uses the LME. A very interesting blog on
the Traderight website using sugar as this specific example but
applying equally to copper had this to say.  "I sense a groundswell of
opinion in the commercial trade, including end-users and producers as
well as trade houses and their futures brokers, that the current
situation is becoming untenable and that #11 is no longer fit for the
purpose. Meaning that it does not serve the purpose of the commercial
trade any more in relation to price discovery and accepted hedging
practices, including price fixation of physical sugar contracts."

An integral part of the shift in pricing from the trade to the
financial sector has been the banks and merchants acquisition of
warehousing complexes such as Henry Bath, Pacorini, Metro and NEMS at
top dollar prices in order to gain control of stock movements and to
reduce the cost of finance of both LME and non-LME metal. 

As another blog on Traderight wrote,  "The resultant drawdown of
LME metal was inevitable and the non-availability has been exacerbated
by the proposed launch of the LME warrant backed ETFs. Those investors
who were persuaded to invest in forward copper at the depth of the price
trough in 2008-9 needed higher spot prices in 2010-11 to eliminate the
cost of carry they had borne for two years and some of the returns were
guaranteed or underwritten by banks in 2008-9 to try to get risk off
their books while they were seeking central bank funding. These chickens
would come home to roost unless a positive roll could be achieved and
this in turn would only come through a backwardation, which could only
be justified and maintained if stocks were reduced or if undeliverable
stock in the form of rod, wire and metal in non-LME warehouses is hedged
on the market and the hedges need rolling as the metal is
non-deliverable."

These developments are exacerbating price movements on the upside so
long as the „risk-on? trade is maintained. But, in a world where growth
is liable to falter and sovereign debt problems to escalate, the
„risk-off? trade can easily return. When that happens not only will the
longs move to liquidate their long physical and futures positions, but
prices will be pushed even lower by the very same people who have pushed
them up to the current giddy heights. 

The large-scale intrusion of the financial sector, with the apparent
support of most large producers, creating a structure that makes the
copper market seem tight and thus able to push prices continuously
higher, is destroying the very foundations of the industry. Demand
destruction is widespread and will deepen even more as manufacturers
throw funds at R&D to design copper out of their products, a subject
we have explored at some depth for some time. 

The real question is how long can this new structure last. The answer
really is until the second global credit crisis hits the world. This
will probably begin later this year and explode in 2012 to be followed
by a return to global recession and deflation. 

Copper prices will be conditioned by these developments. Peak prices
for 2011  will be experienced in the first quarter of the year, if they
have not already been seen. Prices will then fall until around the start
of the fourth quarter, hitting a low of some $5500. Recovery will
follow rising parabolically in 2012 to some $14,000 by the end of next
year. 

This will signal the end of the gaming of copper prices. A return to
global recession, deflation and the destruction of large end uses of
copper will see prices crashing to levels long since forgotten - to
under $1500 by 2016. It will be at that point that the real
restructuring of the industry will take place.  Future trend growth
rates for world refined copper consumption will be below 2% a year
implying that marginal producers will be closed down. It  is not a
shortage of supply that will shape the future of copper but a shortage
of required material for furnaces.

Today?s focus on short-term copper prices has sown the seeds for its
own destruction.  History does not always repeat itself but it
frequently rhymes. As in the mid-1980s, material warehoused outside the
reporting system will be thrown onto markets as investors/speculators
will demand cash against their investments. 

Simon Hunt was one of the founders, in 1975, of top metals analysis consultancy Brook Hunt, which still bears his name. He
left at end-2005 to start up Simon Hunt Strategic Services which
specialises in copper, global economics and China.  For further
information please contact Simon Hunt at Simon Hunt Strategic Services
on +44 20 7859 111 or
simon@shss.com - website www.shss.com

h/t Ed

 


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Sat, 01/08/2011 - 18:43 | Link to Comment Bigger Dickus
Bigger Dickus's picture

I shorted paper gold on Thursday. I am very nervous right here.

Oh and First! Or second!

 

Sat, 01/08/2011 - 18:52 | Link to Comment LowProfile
LowProfile's picture

Not sure why you would want to short the biggest bull market in our lifetimes.

If I was to go short, I would do some other commodity or perhaps emerging markets.

That said, I'm short term bearish on gold here, but I consider it a possible pullback for a long entry.

BTW, how else can you short gold other than paper gold?  LULZ

Sat, 01/08/2011 - 18:56 | Link to Comment Bigger Dickus
Bigger Dickus's picture

I guess you could do it by borrowing some eagles from the local coin shop or from a rich old lady.

Hmmm, I think there is money to be made here. Rich old ladies, lend me your gold coins...lol

 

Wed, 01/12/2011 - 05:14 | Link to Comment cruxx
cruxx's picture

It ain't 1980s anymore. Once the gold price spikes the shit out of bernank, he will jump in using his Ponzi Fed and convincing congress into making gold the last asset class you would consider.

Sat, 01/08/2011 - 19:29 | Link to Comment Sudden Debt
Sudden Debt's picture

Gold, Silver et all are NOT in a bull market yet.

 

Once the general public gets involved and feeds a mania, all everyone talks about is that hot asset.  People who have never invested before sell stuff and mortgage their houses to raise cash to plow into the mania.  Waiters and housewives and people never interested in the markets before eagerly brag about how well their new investments are doing.  Today silver is nowhere close to being popular among mainstream Americans.  I bet less than 10% of investors own any, let alone the non-investing public.

 

How many people do you already know that own gold or silver?

It's only now that people are starting to hear noise about gold and silver. Just wait another 6 to 12 months before people actually start to talk about it and after that it can go fast.

Silver for example bottomed at $8.74 ($25.90 real) in August 1979.  Over the next 5 months it shot 450% higher to its all-time high of $48.00 ($134.99 in today’s dollars).  So though silver’s famous 1970s secular bull lasted for over 8 years, a whopping 5/6ths of its entire gains accrued in just the final 5 months alone! And THAT was the bullmarket, the last 5 months.

 

Sat, 01/08/2011 - 20:56 | Link to Comment woolly mammoth
woolly mammoth's picture

Good post. Thanks!

Sat, 01/08/2011 - 22:36 | Link to Comment bunkermeatheadp...
bunkermeatheadprogeny's picture

Own a ton of silver +/- 200 lbs.  I've been buying and collecting silver since the mid-80's when it went out of fashion.

I am the exception, my Grandfather was a prolific silver hoarder since the late 50's. As a kid, I learned that real money makes a ping without the zing (referring to the sound and taste).

After watching the value of silver drop and stay depressed for nearly a generation, I do not get excited one way or the other - just something I will hopefully never have to use and can leave to my (now young) children who, all under 7, also know about the ping without the zing.

I also inherited about a ton of copper pennies when that was thought to skyrocket.  I even remember in the early eighties the CBS news report talking about the melt value back then.

Gold would be much less cumbersome, but I remember my GF telling me, holding a silver quarter "this, this is what you can exchange for a loaf of bread".

I didn't get it back then, but what I think he meant was its harder to break up a gold brick for the survival needs of your family than it is to simply use silver coins where the value is easily ascertainable.

The storage space taken up by the silver annoys my wife as much as it did my grandmother.  If I costed out the storage space over the last 6 decades, silver has been a net loser intergenerationally vs. other investment opportunites.

But at the end of the day, I'm lucky that I have it, and have always been unwilling to part with it, regardless of the fiat costs.

Sun, 01/09/2011 - 02:13 | Link to Comment markmotive
markmotive's picture

Yes, but that particular example was caused by two brothers cornering the market for silver. Do you have another example?

Sun, 01/09/2011 - 15:12 | Link to Comment Trader7
Trader7's picture

You make some good points, except for saying gold and silver are not in a bull market. Yes they are. What you are describing is that the mania phase of a bull market had not started yet. The mania phase is the last phase of a bull market, but it is still only a phase.

Sat, 01/08/2011 - 20:19 | Link to Comment duncecap rack
duncecap rack's picture

I can't quite make out your avatar but is that the cartoon character Johnny Bravo?

Sat, 01/08/2011 - 20:23 | Link to Comment Bigger Dickus
Bigger Dickus's picture

Yup. Best cartoon on Cartoon Network. And no, I am not a long term gold bear like Johnny Bravo (the ZH member, not the cartoon character).

Sat, 01/08/2011 - 20:46 | Link to Comment duncecap rack
duncecap rack's picture

I was kind of wondering if you were THAT Johnny Bravo. He disappeared after calling the top in gold at 1200.

Sat, 01/08/2011 - 21:11 | Link to Comment Bigger Dickus
Bigger Dickus's picture

Yeah, I changed my avatar on purpose to get people confused. My old one used to be a cute girl in a bikini.

Sat, 01/08/2011 - 18:54 | Link to Comment equity_momo
equity_momo's picture

Wheres Cu today? 9 , 10k? Halves to 5500 then 14000 to 1500 ? in 5 years?  Squid are going to have a field day. They're going to need to shift their inventories soon though , along with Blythe. Alot of the so called "demand" in copper the last 12 months has been nothing more than IBs  warehousing loads of the stuff , a la the oil trade of 2007-08.

Sun, 01/09/2011 - 15:47 | Link to Comment 4xaddict
4xaddict's picture

China have no need to lie about their data on Cu because they have little idea of where it stands amongst th."pig farmer" investmen market.

I've been doing business there for quite some time and can tell you that all reports about companies taking easy loans from the Chinese stimulus package post Lehman and speculating in physical commodities rather than purchasing te plant and making the capital investments they were supposed to are correct and then some.

People can claim no crash while JPM is involved and all other manner of BS however the truth is you have no idea what is going on in China till you have spent enough time there to know people.

Mon, 01/10/2011 - 08:50 | Link to Comment blindfaith
blindfaith's picture

yes you are right, but to many 'know it alls' sitting behind their desks and pushing buttons and reading someones else's 'opinions' and repeating them as facts, just don't and won't get it (many are right here on ZH and on this page too).

Our business has be stable and growing since 1973.  Over 100 employees, 7 states, 8 outlets, and managing all the recessions since 1973, but we are now closing.  All that is lost, specifically because of the sky-rocketing price of non-PM metals ( copper, tin, zinc, ect.).   But you all don't get it, you can't see it, you have no idea how all things are connected.  You think and believe that each 'thing' in life is stand alone until you spend time to understand and connect the dots.

To 'speculate and or invest" in gold and silver I don't care it may do little to the consumer world, the bread and butter world we live in.  But common metals speculation has destroyed many businesses in the USA and doing so at an alarming rate right NOW.

So who cares?  Certainly NOT Americans, so it seems. We cry like babies (and crying seems to be the new thing on TV) about how bad things are, but we don't get that we are making them bad.   Before the financial pigs and the hedge funds (got an investment there?) entered the farm yard, we knew that commodity metals would go up and down as usual....the whole idea of a commodity market is to moderate prices...but notnow.  You imagine trying to stay in business when ONE item is $10 in August, $14 in November and $19 right now...and that is one item by the pound.  This is what Brazil in the 1990 faced.

The Government does not care, investor/speculators don't care, the media doesn't care, you don't care.  Just the 100 plus people who have lost their jobs and won't be counted, CARE.

All of you believe that you have outsmarted the markets, each other, the computers, etc., but when you wake up one day, God willing, and see that the landscape is an empty wilderness you will have your metals contracts to keep you warm.  But then you have your own ass to look out for, isn't that the new thinking, me, just me?

Thu, 01/13/2011 - 17:42 | Link to Comment Trader7
Trader7's picture

Blindfaith: Thank you for writing that. I for one do care, but have little knowledge of manufacturing. I did, however wonder what was happening to companies that make things out of metals now that the price is so high, yet the demand for the final product is not enough to get the consumer to pay a higher price. Well, like you said, they are having to close down and thereby eliminate jobs.

Sat, 01/15/2011 - 08:15 | Link to Comment simonsito
simonsito's picture

I really appreciate this insight, too... yours is one of the posts here that are STILL( contrary to a growing number of posts ;) worth reading and reflecting!

Sat, 01/08/2011 - 18:54 | Link to Comment Hulk
Hulk's picture

5 year projections, way too much fluoride in that dudes water...and anyone who buys them...

Sat, 01/08/2011 - 19:07 | Link to Comment Hephasteus
Hephasteus's picture

Plus he's not getting the connection. China isn't lying about it's data. It's lying about our data. So we can sell 4 million ipads in a week without it showing up on OUR DATA.

Suspecting chinese data isn't suspecting china. It's suspecting the gang entanglements of wester companies who ganged up with them.

Sat, 01/08/2011 - 19:39 | Link to Comment Hulk
Hulk's picture

Interesting. Next Gen solar panels based on Cu, not Si, due to plentiful availability of cheap Cu (as opposed to highly refined Si) This will tend to keep prices up

 

http://ei.haas.berkeley.edu/c2m/Sulfides_Solar.pdf

Sat, 01/08/2011 - 19:54 | Link to Comment Herd Redirectio...
Herd Redirection Committee's picture

I'll have to take a look at that.

But I will say this about price prediction.  How can any of us predict a price in USD when we do not know the rate at which USD will be devalued???  Basically he predicts more demand for copper in the short term, but a decline in the long term?

Check out our latest PsychoNews story: Signs of the Apocalypse

http://psychonews.site90.net

Its not that PsychoNews is opposed to looking at the bright side of the economy, its that certain issues must be addressed for real recovery to take place, companies have to be allowed to go bankrupt again (no more Too Big to Fail), mark-to-market accounting has to be brought back (for EVERYONE), US debt has to be defaulted on, manufacturing brought back to North America, (private) central banking outlawed...  Until those things happen every uptick in GDP or fantasy unemployment statistics is meaningless.  The issues of shadow housing inventory (held off the market by banks), unfunded liabilties, government deficits, currency debasement and structural unemployment continue to lurk.

Sat, 01/08/2011 - 19:55 | Link to Comment Herd Redirectio...
Herd Redirection Committee's picture

http://psychonews.site90.net

Seems there was a link in my post already. There can be only one!

Sun, 01/09/2011 - 16:28 | Link to Comment Bob Sponge
Bob Sponge's picture

I was also surprised that Hunt did not take currency debasement into his price predictions. Mr. Hunt, meet Ben Bernanke.

Sat, 01/08/2011 - 21:58 | Link to Comment Protonrick
Protonrick's picture

Perhaps.

But using fiberoptics instead of copper wire, and crosslinked polyethylene [PEX] instead of copper pipes may reduce demand for copper significantly.

Sun, 01/09/2011 - 15:17 | Link to Comment Trader7
Trader7's picture

Yes, I think those two things are cheaper under mass production than copper wire and piping even if copper fell by 50%, plus it is much less labor to plumb a house with PEX.

Sat, 01/08/2011 - 19:02 | Link to Comment AUD
AUD's picture

Guesswork, this guy has no idea what copper will be next week.

Sat, 01/08/2011 - 19:14 | Link to Comment DosZap
DosZap's picture

Well I for one hope he's correct, since JPMorgue has taken over 89% of the Mkts.

Sat, 01/08/2011 - 19:27 | Link to Comment robertocarlos
robertocarlos's picture

All that work collecting pre-82 pennies is not going to pay?

Sat, 01/08/2011 - 19:39 | Link to Comment mynhair
mynhair's picture

Just not as much.  Why recycled copper is not as good as virgin escapes me.

No pun intended.

Sat, 01/08/2011 - 19:41 | Link to Comment Rogerwilco
Rogerwilco's picture

Amazing how so many smart people don't remember the events of July 2008. It was a bull market then as well, oil was going to $200, and base metals were flying high.

Sat, 01/08/2011 - 20:49 | Link to Comment barkster
barkster's picture

Rog, you are correct and that makes me very nervous here.

so many markets are being held up by sleight of hand that could be reversed overnight (once the big boys are comfortably short, of course). Frankly, I am not comfortable playing copper because I do not believe that the world economy is strong.  Gold (and maybe silver) however, can be viewed as monetary metals. A look at the performance of gold and gold mining stocks in the 1930's (initially sold off then went gangbusters) makes me feel that if we get another general market sell-off, and if gold and mining shares sell-off initially with the general market, buy the hell out of them because the decline in them will be short and not nearly as deep as in 2008. And I have a feeling that this time the big boys will be buying all the way down and the rise in them will be meteoric once they bottom. Gold is what you want to own in a depressionary environment combined with a monetray confidence crisis, not copper.   ...just thinking out loud a bit.

Sat, 01/08/2011 - 22:40 | Link to Comment bunkermeatheadp...
bunkermeatheadprogeny's picture

I remember silver prices being depressed day after day late summer through the remainder of 2008, but didn't we learn that it was that particular time period that JPM is now under investigation for silver manipulation?

Sat, 01/08/2011 - 20:18 | Link to Comment Mercury
Mercury's picture

If copper plunges I'm getting a copper roof.

That's pretty much the extent of my Cu strategy.

Sat, 01/08/2011 - 20:15 | Link to Comment RobotTrader
RobotTrader's picture

As long as JP Morgue has 80% of the open interest, there is zero chance of copper crashing.

Not until an extended distribution period which could last 6 - 9 months, where Blythe can offload her stash on to hapless Chinese pig farmers.

I mean think about it.  Do you think JPM is stupid?

Sat, 01/08/2011 - 20:23 | Link to Comment duncecap rack
duncecap rack's picture

We can hope they get skinned.

Sat, 01/08/2011 - 20:28 | Link to Comment mynhair
mynhair's picture

Yes.  JPM is stupid.  They don't see that light at the end of tunnel called 'TEA Party'.

Sat, 01/08/2011 - 20:49 | Link to Comment Quinvarius
Quinvarius's picture

JPM is why there is a 100% chance of copper crashing.  They are batting zero on trades where they get too big for their britches.  Coal, silver, gold, and now copper.  JPM has the least talented commodity traders I have ever seen.  They have no concept of scale.  Loading up on copper in a housing slump is a GD stupid idea anyway.  As far as I can tell, they are trying to get house prices up based on their scrap copper value so they can unload their shitty mortgage book.

Sat, 01/08/2011 - 22:07 | Link to Comment jdrose1985
jdrose1985's picture

This is why I don't understand the inflationists/dollar bears.

You think the dollar is going to be obliterated, yet copper priced in dollars is going to crash as well?

 

Sun, 01/09/2011 - 14:34 | Link to Comment Quinvarius
Quinvarius's picture

This should clear it up for you. 

http://www.nowandfutures.com/images/weimar_copper1914_1923.png

Hyper inflation destroys the currency.  No currency, no trade.  No trade, no demand for things used in trade.  Copper is not a hedge against rising gold and silver, which are money.  How much copper do you consume on a daily basis in your non existant factory?  The same as in a closed down factory or a bankrupt factory.

But you don't want to believe that chart is accurate.  I know it from the last time I posted it.  But it is accurate. 

The only hyperinflation trade is a direct currency trade.  The only currencies that will survive this mess are gold and silver. 

Sat, 01/08/2011 - 20:52 | Link to Comment barkster
barkster's picture

jpm is long physical. anybody have any idea what their derivatives position is? just curious...

Sat, 01/08/2011 - 21:12 | Link to Comment mynhair
mynhair's picture

Anybody know where the warehouses are?

Sun, 01/09/2011 - 13:37 | Link to Comment Mike2756
Mike2756's picture

Well at least the old man wasn't.

http://en.wikipedia.org/wiki/Panic_of_1907

Sun, 01/09/2011 - 14:02 | Link to Comment Hephasteus
Hephasteus's picture

Yes copper hurt them bad during the great depression and it's going to do it again. That's the very definition of stupid.

Sat, 01/08/2011 - 20:49 | Link to Comment proLiberty
proLiberty's picture

We cannot have 'deflation' with the explosion in fiat monies from the various central banks around the world.  Indeed, we don't even have 'money' any more, we have 'liquidity'!  What else should you call money created with the click of a mouse?  One Trillion, two trillion, what does it matter.  One is as easy to create out of thin air by the click of the mouse button as five is. 

 

We can have decreases in prices due to declines in demand, but that is not 'deflation' any more than when TigerDirect sells a 2 T disk for $69, down from $79.

 

Sat, 01/08/2011 - 21:13 | Link to Comment mynhair
mynhair's picture

You paid $69 for only 2 terrabytes?  Have I got a copper contract for you......

Sat, 01/08/2011 - 21:38 | Link to Comment Missiondweller
Missiondweller's picture

Am I reading this right, he's saying there is both market manipulation in copper that won' t last AND a massive drop in demand (referencing China)?

 

Sounds like he's signaling that the great Chinese real estate bubble is about to burst.

Sat, 01/08/2011 - 22:13 | Link to Comment Silversinner
Silversinner's picture

China keeps on exchanging fiat dollar

for copper and stockpiling it.They know

India will needs lot of it in future times.

India people have lots of gold(real money)

to buy copper with.

Just an other way of dumping us$.

Sat, 01/08/2011 - 23:11 | Link to Comment Stuck on Zero
Stuck on Zero's picture

The price of energy and noble metals (as byproducts of copper production) are very large factors in setting a floor price for copper.  If gold goes to $5000/oz they'll give copper away to keep the gold.  If oil goes to $200/bbl copper will skyrocket in price.  My point?  Not all prices are set by speculators.

Sat, 01/08/2011 - 23:53 | Link to Comment Rogerwilco
Rogerwilco's picture

In 2008 the hedgies were selling office furniture to meet margin calls. The gears turn both ways, and when prices head down, speculators are often the grease.

Sun, 01/09/2011 - 02:25 | Link to Comment Smedley Noshbone
Smedley Noshbone's picture

Now why would simon Hunt be slamming the future prospects for copper? Hmmmmmm?

Sun, 01/09/2011 - 02:26 | Link to Comment Smedley Noshbone
Smedley Noshbone's picture

Now why would simon Hunt be slamming the fture prospects for Copper? Hmmmmm?

Sun, 01/09/2011 - 03:19 | Link to Comment ebworthen
ebworthen's picture

Ah copper.

Unless the world is going away from electrical power and back to the horse and buggy it will be valued.

Perhaps copper has been a victim of speculation and HFT trading price volatility; however, it could also be part of the search for commodities unhinged from reality like fiat currencies are.

It's all about time frame; what is your time frame? 

When people stop ripping the copper wiring and tubing out of foreclosed homes and businesses I'll concede you may have reached a top; hasn't happened yet...

Sun, 01/09/2011 - 04:17 | Link to Comment Motorhead
Motorhead's picture

Isn't the JP Morgue planning on a copper ETF or some shit?

Sun, 01/09/2011 - 11:39 | Link to Comment Uncle Jim
Uncle Jim's picture

Maybe I'm missing something but where is North American consumption in table 2.  That would add approximately approximately 3mm tonnes of 2011 demand.

Sun, 01/09/2011 - 13:23 | Link to Comment mcarthur
mcarthur's picture

I think Simon has been off the meds too long.  I used to have much respect for him when he just concerned himself with the supply side of copper and the various costs entailed, but he is on dangerous ground now trying to time the various booms and busts.

Slide 29 of the attached shows the copper cost curve for the industry.

http://www.bhpbilliton.com/bbContentRepository/docs/100927MineraEscondid...

 

There is lots of room for the copper price to slide before there will be mine closures.  However slide 34 is important since almost everyone of the top ten producers in the world is now entering a phase of diminishing production.  Only with intensive capital injections can they halt or reverse this but they certainly will not make an attempt to if Simon's forecast of a collapse in price comes about even if temporarily.  Oh, and the market is in deficit this year by about 500,000 tonnes copper and the days supply in inventory is shockingly low.  Five weeks supply is necessary for price to fall back significantly but we are sitting at about one weeks supply.

Simon is choked that his previous ability to forecast the price of copper based upon supply cost has been usurped by the financial gurus messing with the markets.  But this is not going to go away, and he is not going to be able to return to his glory days I am afraid.

 

 

 

 

Sun, 01/09/2011 - 13:07 | Link to Comment French Frog
French Frog's picture

Can anyone tell me which Copper market/currency/contract.... (delete as appropriate) he is talking about? With Crimex future contract at $428, none of the figures in his article bear any relation to current (accepted) price. What am I missing? Cheers

Sun, 01/09/2011 - 15:26 | Link to Comment Trader7
Trader7's picture

My guess is he is talking about dollars per ton(2000lbs). $5500 per ton as he predicts for the latter part of 2011 would put CU at around the June 2010 lows.

Sun, 01/09/2011 - 15:29 | Link to Comment Trader7
Trader7's picture

Btw...that $428 is really $4.28 per pound. If you take the $5500 figure and divide by 2000lbs, you get a price of $2.70 per pound....which is right around the June '10 low.

Sun, 01/09/2011 - 18:19 | Link to Comment SmittyinLA
SmittyinLA's picture

The big copper push comes from 3rd worlders upgrading 1st world status, from water wells & candles to indoor plumbing & electricity, at some point in time humans will hit the earth's maximum sustainable population level, a few years after that the human infrastructure build out will be completed, after that there wont be much need for more new copper as recycling will meet all humankind's needs, we're decades away from that time and the cheap easy ore will likely run out long before we run out of people, wars could add a huge new demand too. 

Sun, 01/09/2011 - 23:17 | Link to Comment dehdhed
dehdhed's picture

when i read the headline for this article i didn't get the jist of the prediction for copper prices more than doubling in the next couple years ... wouldn't that be a more appropriate title?

wonder why just the focus on copper's eventual decline many years away?

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