Investors: You Should Be Watching Copper

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Commodity-exporting countries have struggled to counter lower oil and metal prices for a number of years now.

That’s probably partly why the World Bank cut its 2016 growth forecast in June 2016 to 2.4% from the previous 2.9% in January.

Take copper, by way of example. Copper made a high of $8,828 per metric tonne in 2010. By 2015, it dropped 38% to $5528 per metric tonne.

By September 2016, it dropped further to $4716.

That’s just over a 50% fall in price in the last six years.

Copper prices have been smashed by a surge in supply while demand slowed in China.

Time to watch this market for opportunity

If one is to believe the World Bank’s forecast for copper out until 2025, you just cannot help noticing that copper might be putting in a potential bottom in 2016.

I say that tentatively. You never want to get into the habit of calling a bottom. Don’t try and outsmart the market.

But we’ve seen an up-move in other commodities like coal and iron ore lately.

The forecasted copper price for 2017 is $5,135 per metric tonne, rising to $7,000 in 2025.

See for yourself…

Click to enlarge

That’s particularly good news — if it pans out — for commodity exporting countries like Australia.

The Department of Industry, Innovation and Science expects export earnings to grow to $208 bln by 2021, and commodities prices like copper are the key.

This is useful knowledge for the share market. For example, copper is a major pillar for BHP [ASX: BHP], the world’s biggest miner. And there’s a major development happening that could spur on copper demand.

The revolution in transport happening now

No doubt you’ve heard about Tesla and electric cars. Well BHP too is hot on the trail of electric vehicles (EV). It expects copper demand to rise as EV use expands.

EVs currently have about 80 kilograms of copper in them.

By 2020, about 2.2m EVs are expected to be sold globally.

According to Bloomberg Energy Finance, in 2015, global EV sales were about 462,000.

By 2040, EVs will form 35% of global new car sales, rising to $41m.

But that’s not all…

Copper is used in many other industries.

One important one is renewable energy. Copper is highly efficient and is used in renewable energy systems to generate power from solar, hydro, thermal and wind energy globally.

So in the same vein, BHP expects copper to play a key role in renewable energy.

As a result of this demand, BHP expects there may be a copper deficit of 4 million tonnes from 2023.

According to Bloomberg Energy Forecasts, renewable sources will account for as much as two thirds of an estimated $12 trillion of investment in energy over the next 25 years.

So while prices might be depressed right now, keep watching copper prices. Of course a lower USD would also help.

Believe it or not, copper has an important correlation with the property market. Cycles, Trends and Forecasts editor Phil Anderson comments on the price of copper in his book, The Secret Life of Real Estate & Banking.  On page 370 of his book, he analyses copper prices between 1870–1970 and 1968–2007. In all instances, ‘copper prices spiked into the last years of each real estate cycle.’

Knowing the real estate cycle is your investment advantage in trading markets. It’s highly profitable knowledge to have, and subscribers to Cycles, Trends and Forecasts know all about this dynamic.

To get this advantage and understand how all this can be forecasted and timed to your advantage, go here.


Terence Duffy,
Lead Researcher, Cycles, Trends & Forecasts

About Terence Duffy

Terence Duffy is an analyst and chartist, specialising in researching economic trends and cycles.  His primary focus is housing and land affordability. But you can also depend on him to offer his unique analysis of stock market charts. As Terence will show you, the charts often forecast, well in advance,…

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