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Share Watch – Copper, the new oil – 9 May 2021

The world risks “running out of copper” amid widening supply and demand deficits, according to Bank of America, and prices could hit $20,000 per metric ton by 2025.

In a note Tuesday, Bank of America commodity strategist Michael Widmer highlighted inventories measured in tons are now at levels seen 15 years ago, implying that stocks currently cover just over three weeks of demand. This comes as the global economy is beginning to open up and reflate.

“Linked to that, we forecast copper market deficits, and further inventory declines, this year and next,” Widmer said. “With (London Metal Exchange) inventories close to the pinch-point at which time spreads can move violently, there is a risk backwardation, driven by a rally in nearby prices, may increase.” Backwardation is when an underlying asset is trading at a higher price than the futures market for that asset.

Widmer also highlighted that a rise in volatility resulting from falling inventories was not without precedent, since nickel shortages in LME warehouses in 2006/7 drove nickel prices more than 300% higher.

Given the fundamental environment and the depleted inventories, Widmer suggested that copper may spike to $13,000/t in the coming years after notching $10,000 last week for the first time in a decade.

Along with the broader economic recovery, demand for copper is also being boosted by its vital role in a number of rapidly growing industrial sectors, such as electric vehicle batteries and semiconductor wiring.

Taruga Minerals (ASX:TAR)

Shares shot up nearly 70 per cent on last week after Taruga said it made a high-grade copper discovery at its Mt Craig project in South Australia.

Fast-tracked assays from the first five holes drilled returned hits like 5m at 2.4 per cent copper from 17m, including 1m at 9.5 per cent copper from 18m, at the Wyacca prospect. All 30-reverse circulation drillholes intercepted visible copper mineralisation, Taruga said.

Genesis Resources (ASX:GES)

Genesis could be riding the coat tails of the copper boom.

Genesis owns six exploration licences spanning 919.08 in Queensland and the Northern Territory. It also has gold and copper joint venture in Macedonia.

In the Northern Territory, previous rock chip samples delivered grades of up to 40 per cent copper.

The Plavica gold-silver-copper project in Macedonia appears to be the main focus for the company, with metallurgical studies ongoing.

Genesis says the results so far show that recoveries, at about 83 per cent, are not affected when re-using the leach solution multiple times. Silver and copper are also recoverable.

Financial indicators

The VIX fear gauge down since 2 May by 1.92 points to 16.69 and well into the safety zone.

The Dow Jones Industrial Average up 902.91 points or 2.67% since 2 May to 34,874.85, the STOXX 600 up 7.54 points or 1.72% to 444.93 and the Shanghai Composite index down 27.99 points or 0.81% to 3,418.87.

Gold up to 1,832.00. US 10-year Treasury Bonds on 1.577 and oil up to 64.82. Cryptos Bitcoin up by 3,083 points or 5.48% to 59,318.

ASX 200 up 55.00 points or 0.78% since 2 May to 7,080.80 today. The Aussie dollar up to 78.44 US cents.

Eco Market Spot Prices

LGC $35.55

STC $38.60

ESC $30.25

VEEC $60.50

ACCU $19.05

Sources: RenewEconomy, demandmanager,  Reuters, SMH, Market Watch, Stockhead

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