While growing demand, especially from China, has analysts bullish industrial metals, the king of industrials, copper, is not expected by many to advance.
It is not that some new exotic metal will replace copper; just that prices have been fat and supply is not expected to be an issue.
“Copper has been the star performer in the entire metals group,” Mohr says. “Although pricing in recent weeks has moved down to the $3.30 mark, it remains exceptionally profitable for miners. One of the reasons copper has done so well is the fact that there has been growth in demand in emerging markets, particularly China, but also because new line supply has come on stream slowly. Copper was on a supply deficit.”
That void is expected to be filled, according to Mohr. “In the next 18 months, there is going to be a lot of brownfield (existing mines) expansion finally coming on stream,” she says.
Another reason for her outlook is that copper, while affected by the global economic tsunami in 2008, rebounded quickly. “Remember China’s economy, although it slowed in 2008, never went negative year-over-year,” Mohr says. “Copper snapped back very quickly in 2009. Traders realized that China’s state reserve was buying. China put together a massive infrastructure spending program on railways and bridges and municipal works to kick-start their economy.”
She expects copper to drift lower for the rest of the year and to continue its weakness into 2014, averaging $3.20 per lb.
Platt also is bearish copper. “Copper is still overpriced. I have a hard time seeing copper at these prices. Aluminum might actually be the market that has some potential because of the structural adjustments you are forcing on the producers given the low prices prevailing,” Platt says.
He sees copper and aluminum benefiting from increased demand, but prefers aluminum because of its current valuation. It seems with gold fever waning, traders still will find some action and profits to be made, just not in the usual places.