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Commodity Carnage Continues - Copper Crashes To 6 Year Lows
Across the board commodities are weak again today as CCFD unwinds and mal-investment booms collapse across the world. Copper is under the most pressure today, plunging to its lowest since June 2009... but of course, Dr.Copper now knows nothing about economics because eyeballs trump reality in the new normal...
In July, things are not going well...
Smashing copper to its lowest since June 2009...
Ignore this chart... it's different this time
And meanwhile, Goldman has turned decisively bearish with a forecast that's some 30% below consensus as macro and micro factors conspire to create a veritable perfect storm:
Though we have been bearish on copper on a 12-mo forward basis for the past two and a half years, we have maintained a more bullish medium to long-term stance on the assumption of Chinese copper demand growth of 4% per annum and a major slowing in supply growth around 2017/2018. We substantially lower our short, medium, and long-term copper price forecasts, on the back of lower Chinese copper demand growth forecasts (we have been highlighting that the risk has been skewed to the downside for some time), increased conviction in copper supply growth over the next three years, and less conservative assumptions regarding mining cost deflation in dollar terms.
We now forecast 3/6/12-mo prices of $5,200/t, $4,800/t, $4,800/t, and we target $4,500/t by the end of 2016, 20% below spot prices and more than 30% below consensus. Our new 2017 and 2018 price forecasts are $4,500/t (from $7,000/t and $8,000/t respectively), with the price eventually forecast to rise back above marginal cost by 2020, to $5,500/t, as the market adjusts to a 7-year bear market cycle (2011-2018). Our new long-term forecast, from 2021, is $5,000/t in $2015 terms (from $6,000/t).
We see the risks to these forecasts as skewed to the downside during October-March 2015/16 and 2016/17 – periods associated with seasonal ‘visible’ inventory builds.
The 3D’s of macro combine with bearish copper ‘micro’
Specifically, we see the 3D’s of ‘macro’ – Divergence, Deflation, and Deleveraging – as the key bearish macro drivers (please see Commodity Watch, July 8, 2015, for details) placing substantial downward pressure on Chinese demand growth and global production costs over the medium to long term. Combined with a bearish outlook for the copper ‘micro’ – a high conviction forecast in an acceleration of mine supply growth over the next 6-18 months and copper’s high exposure to weakness in late China property cycle construction completions – it is, in our view, highly likely that the 4-year trend decline in copper prices is set to continue through at least 2018.
As such, we strongly recommend producers increase the hedging of their copper exposure, and investors either reduce long exposure or take out long-dated short exposures in copper.
Trade accordingly.
Charts: Bloomberg
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Dr copper needs to self vaccinate.
Sincerely,
Kalifornia
Paging Dr. Copper...report to the ER, stat!
Teh we suspects that copper is the same story as silver. All paper games, empty warehouses and empty promises. Might make sense to have some of this type of phyzz as well...
Copper is not Silver
The collapse is here and with it, a huge reduction in population. With that you will have a huge decline in copper demand since house will not be built, they will be demolished. And what's left when there is a huge downsizing? Lots of copper(wiring and such that can be salvaged) but no silver.
2 very different stories here.
2 different stories yes... but copper can function in exchange and barter just like silver. The traditional copper to silver monetary ratio is 60/1 but silver will be so hard to find, so scarce after the collapse that it makes sense to have the lesser metals copper and nickel for barter and to make change after TSHTF.
When was the last time copper was used as a medium for exchange of goods and services? It's been a few thousand years? Copper, like iron and aluminum, is an industrial metal, not a precious metal. Precious metals are gold, copper, and platinum, because they are rare
Even the chinese have smashed copper with the fake "warehouse" to "warehouse" scheme.
How about a side of (Forced) Gardasil with your 17 course vaccination meal...?
Thank god it is a post Lehman chart
All commodities are assuming the suck position and things are starting to become a bit obvious, so the answer is to dump sedatives in the sheeps drinking water.....
I'm surprised no one has been corzined by this yet.
Perhaps lost in all the hoopla and Kool-Aid guzzling keggers hosted by genius commission rakers is that we still have not YET seen publicly a major firm confess to a severe beating taken related to some of the very major movements we have seen.
By that I mean the type of hit one can experience when USD soars and crude plunges like they have and you are up to your eyeballs at 30x leverage or even 50x leverage. You mean to tell me those moves in crude and USD (and copper and many more coming) have not wiped out major equity at some prominent houses??? Come on.
Equity is good as it's being back stopped by QE's globally.
Not to mention Toshiba's leading accounting magic.
They aren't the only ones doing it, they just got caught.
Uh, I guess the China guys are unhappy after buying copper mines in South America a few years ago. But who knows? Maybe they're still electrifying and telephoning their whole country finally with all the cheap (and getting cheaper) COPPER.
I am SO OLD, that ZZ TOP played at my high school graduation party. Got a shack outside LaGrange - gotta' lotta' nice girls.
No more floor trading on the cme, better strip the copper before it goes down more
Goldman Bearish? - Lube up for the massive short squeeze , baby
I'm hoping this commodity crash at least takes out the Aussies, just because an Australian fellow I know wouldn't stop bragging about their great economy a year back or so.
He's a bit more silent nowadays, maybe ready to assume the position.
Now that's some world class spite!
They have rabbits and roos.....and the big fat woman who is the richest person in Aussie land who owns all the mines...who just cut her employees wages by quite a bit.....but not her calorie intake...she is a ruthless boss...she even beats up on her family...
Aussie Dr. Copper won't get it up and out any more. Dr. Copper scared what he sees, and just lay low underground and wait the next 20 years out.
There are probably enough empty fake cities in China and collapsing cities like Detroit to meet the copper needs for the next few decades, in addition to all the copper in warehouses.
Those loud bragging Aussies...
does jim rogers still live in Shanghai and having his children learn Mandarin?
Singapore
Ignore this chart... it's different this time
BWAAAAAHAHAHAHA DIPSHIT CENTRAL PLANNERS"Gold price folding like a cheap suit" says CNBC. I think we just hit bottom. Time to buy.
What's it all mean?
OK, help me out here folks. If copper and other bulk commodities are tanking, why is the BDI on the rise? And, specifically, the Supramax Index? Are they still shipping ore across the ocean to smelt and then allow stockpiles to bulge?
At 1118, BDI is essentially bouncing along the bottom.
But it is still better than the 790.00 it was a month ago. And, if you look at the trend, it moves opposite of the price of copper and other bulk commodities. Are they finally clearing the "excess capacity" that has been blamed for the low rates all of these years?
1. Unsold goods shipping? a desperate attempt to ship goods before demanded, to feed the kitty ? (really desperate methods)
Eventually the 'at sea' goods will find a home...like the New York trash barges in 1987.
https://en.wikipedia.org/wiki/Mobro_4000
2. Iranian Oil going out to sea for sale (soon).
This could be what a modern Crack Up Boom may look like...deperado shippers in a final attempt to survive.
This is something to start paying attention to for futures contracts:
https://youtu.be/7whL9jvdL5s
I think the reason copper is falling is because the sun is going to sleep and sun bathers don't need as much Coppertone.
Next Question please.
OK. And Gold is going down because someone pulled GoldFinger's finger ?
heh.