Here’s the 60 day copper chart that includes this morning’s action in London that sees it at U$1.61/lb. As we can see, this strong upmove is not the first this year but it does come (yet again) off the U$1.45/lb level that’s become the baseline in 2009 so far.
The reason for the latest optimism is basically the Chinese government over the weekend and its forecast of 8% GDP growth in 2009. Otto sez “hmmmmmmmmmm”. Regarding exports, they might grab all the headlines on this side of the Pacific but they haven’t contributed much more than 3% to the Chinese GDP growth figure in the last few years (I checked). So thinking about the 10% to 12% recent yearly growth figures and sticking a finger in the air, if The People’s Government really pulled out all the stops 8% GDP growth in 2009 is technically possible, I suppose. But it would be one helluva internal stimulus and kinda makes me wonder just how many empty apartment blocks they want in their cities. On balance it’s difficult to see China coming in at 8%, no matter what they might do. Even 5% would be chunky enough for me, given present conditions.
Let’s just point out in passing that copper is a good barometer for China growth. They need 4.5 times more copper imported than they produce themselves, biggest import/export ratio of any base metal shipped to China by quite some distance. So with that in mind, let’s check the longer price chart again:
The above chart is the main reason why iIm not getting hot under the collar about copper yet. U$1.60/lb is a help for the producers for sure (go CS.to!), but there will be no repeat NO new project funding for the greenfields while the spot price begins with a “1”.
Another thing that has perked up spot prices is the slight drawdown in warehoused copper. We can see the LME figures in this chart……
…and that’s another small positive in the mix. The general market thinking is that China is stockpiling at these low levels. That may well be true, but let’s again check the longer chart and get some context on the post Chinese New Year drawdown.
Yeah, context sucks, doesn’t it? That, gentle lector, is a boatload of surplus in anybody’s book.