Gary Shilling: Look Out Below, Copper’s Falling
The commodity price boom that began after China joined the World Trade Organization in 2001 has turned to bust. Copper prices are down 41 percent from their 2011 peak and probably have a lot further to go. So why are copper producers ignoring all the obvious economic signals — lower demand, excess supply and falling prices — and ratcheting up production? The answer is that producers have powerful incentives to increase output. (Disclosure: I manage investment portfolios in which copper is shorted, so I have a financial interest in falling copper prices.) Let me explain. Think back to the early 2000s, when it was accepted wisdom that fast-growing China would soak up most of the world’s commodities. China, indeed, has been buying more than 40 percent of annual global output of copper, tin, lead, zinc and other nonferrous metals. It’s been gobbling up 50 percent of seaborne iron ore and huge quantities of coal. And it has built large stockpiles of crude oil…But even as China’s commodity-intensive exports to North America and Europe atrophy and China’s own infrastructure spending slows, excess capacity keeps building. The reason: It’s not economical to suspend some of these projects due to high sunk costs and shutdown expenses. Some producers, moreover, may not be free to slash output as prices swoon, especially if they’re government-controlled and need foreign exchange to service sovereign debts.
The commodity price boom that began after China joined the World Trade Organization in 2001 has turned to bust. Copper prices are down 41 percent from their 2011 peak and probably have a lot further to go. So why are copper producers ignoring all the obvious economic signals — lower demand, excess supply and falling prices — and ratcheting up production? The answer is that producers have powerful incentives to increase output. (Disclosure: I manage investment portfolios in which copper is shorted, so I have a financial interest in falling copper prices.) Let me explain. Think back to the early 2000s, when it was accepted wisdom that fast-growing China would soak up most of the world’s commodities. China, indeed, has been buying more than 40 percent of annual global output of copper, tin, lead, zinc and other nonferrous metals. It’s been gobbling up 50 percent of seaborne iron ore and huge quantities of coal. And it has built large stockpiles of crude oil…But even as China’s commodity-intensive exports to North America and Europe atrophy and China’s own infrastructure spending slows, excess capacity keeps building. The reason: It’s not economical to suspend some of these projects due to high sunk costs and shutdown expenses. Some producers, moreover, may not be free to slash output as prices swoon, especially if they’re government-controlled and need foreign exchange to service sovereign debts.
Maar Gary Shilling
komt niet met nieuwe argumenten aan. Dit is allemaal ruimschoots verdisconteerd
in de koperprijs. Te ruimschoots zelfs laat de commitment of traders analysis
van Bianco zien. De large speculators zijn begonnen met kopen. Ze moeten nog
extreem gaan kopen om weer enigszins neutraal te komen te zitten.
Na het zwakke eerste
kwartaal in de VS lijkt de groei weer aan te trekken, in Europa trekt de groei
aan, Rusland wordt straks wat minder dramatisch, er is nog steeds in absolute
nominale bedragen een aantrekkende groei in China.
Kennelijk toch tijd
even wat minder somber te worden over de koperprijs.
Geen opmerkingen:
Een reactie posten