Copper demand continues to surge, driven by not only China but the U.S. and Japan as well. Citi’s Alan Heap believes market sentiment is strengthening further despite rather high levels of copper stocks. What stocks does copper matter for? Freeport McMoran (FCX) is one.
‘On the LME, copper open interest is sharply higher, while prices are strong, suggesting new longs are being established.’
He shows how U.S. copper shipments are rebounding. In March they were up 9.5% year over year.
There’s been a huge shipment spike for copper products from Japan as shown below.
Yet the worrying side to the equation is copper stocks. Copper inventories are looking extremely high right now. Thus perhaps the metal could lose steam even if global growth continues as consensus expects, since the rise below (shown in grey, blue, and black) will at some point need to be worked down.
Still, Citi remains rather bullish on copper’s outlook for the next year, with a rising forecast for Copper through June 2011 to the $3.70/pound level. Copper is trading at $3.48 right now according to Kitco. Citi’s forecast thus seems to imply that we could be in for some dips, but we’ll move higher.
Note: The author does not own shares of FCX, but investors he speaks to may.
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