ISRI 2016 Convention: The fundamentals apply

ISRI 2016 Convention: The fundamentals apply
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Some investors and speculators may still cause copper prices to move on any given day, but underlying supply and demand issues are at the core of 2016 copper pricing, according to the commodities director of the Institute of Scrap Recycling Industries (ISRI).

Speaking at the Copper Spotlight session at the ISRI 2016 Convention & Exposition in Las Vegas in early April, ISRI Commodities Director Joe Pickard said, “In the short term, anything can drive the price of copper. When it moves 10 cents per day, it’s not the fundamentals. It’s bullish or bearish bets.”

The influence of such “bets” is waning, however, said Pickard. Throughout 2015 there was “a fair amount of exodus by investment funds away from commodities,” he commented. So “in the long term, fundamentals do play a role” in copper’s price, Pickard continued. “When you see decreasing [inventories], those fundamentals do support prices,” he remarked.

While copper pricing has held near the $2.20 per pound range in the first quarter of 2016, Pickard said bearish forecasts have been made. “Goldman Sachs sees a $4,000 per metric ton average in 2016 and 2017 ($1.82 per pound), and that’s one of the more bullish forecasts,” he stated.

Despite the bearishness, Pickard said the International Copper Study Group (ICSG) is forecasting a global supply deficit in 2016, although by just a small fraction of 1 percent.

Panelist Brian Shine of Manitoba Corp., Lancaster, New York, says throughout much of his career as a red metal scrap processor and trader, COMEX copper pricing in the 70-to-90-cents-per-pound range was the norm, until the price started soaring in 2003 in the wake of China’s rapid metals production growth.

He says the 100-year-old scrap processing firm engaged in its first hedged trade 40 years ago, at the insistence of a customer who “remains a customer today.” Shine called hedging “a necessary component” for Manitoba Corporation to be able to last another 100 years.

Randy Goodman of Greenland (America) Inc., Roswell, Georgia, who moderated the session, said hedging needs to be done with an “all in” approach or not at all. “If you do some hedging, all you’re doing is gambling,” he remarked.

Journalist Adam Minter, who resides in Malaysia and before that lived in China, referred to the current copper demand and consumption outlook in China as “fairly bleak.” He contrasted the consumption of cement and copper in China from 2006 to 2015 to display the relative flatness of cement demand since 2011 versus copper. The implication is that much of the copper purchasing in China in the last five years has been to use it as a safe harbor or form of collateral rather than for industrial purposes.

Minter said some estimates place a volume of 15.5 million metric tons of copper as a “bank” in warehouses throughout China. “That’s going to influence anyone who deals in copper with China,” he commented.

Chinese metals firms, especially state-owned enterprises (SOEs), have been investing heavily in South American copper mining and smelting, which is likely to both suppress the price of copper and temper demand for red metal scrap. The new facilities in South America are being estimated to be able to produce copper at $1.40 per pound, said Minter.

When asked where new copper scrap demand is coming from and likely to come from in the future, Minter said no one country can replicate China’s growth, but a combination of 10 to 15 nations, including those in the ASEAN (Association of Southeast Asian Nations) region, such as Indonesia and Vietnam, are likely to see metals production boosts in the next several years.

Goodman said seeking the new opportunities in 10 or more countries will take more travel, networking and legwork compared to when China first opened up and “it was fairly easy” to make key connections with hungry buyers.

Panelist Amy Kreps of the United States Department of Commerce’s International Trade Administration (ITA) said her agency tries to assist traders engaged in such efforts using websites and physical offices located throughout the U.S. and around the world.

Kreps said tools such as export financing assistance, “top markets” reports and “business matchmaking” services can be accessed at websites such as www.trade.gov/cs and www.export.gov/advocacy.

The ISRI 2016 Convention & Exposition was April 2-7 at the Mandalay Bay Convention Center in Las Vegas.

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Source: Recycling Today
ISRI 2016 Convention: The fundamentals apply
<![CDATA[Some investors and speculators may still cause copper prices to move on any given day, but underlying supply and demand issues are at the core of 2016 copper pricing, according to the commodities director of the Institute of Scrap Recycling Industries (ISRI). Speaking at the Copper Spotlight session at the ISRI 2016 Convention & Exposition in Las Vegas in early April, ISRI Commodities Director Joe Pickard said, “In the short term, anything can drive the price of copper. When it moves 10 cents per day, it’s not the fundamentals. It’s bullish or bearish bets.” The influence of such “bets” is waning, however, said Pickard. Throughout 2015 there was “a fair amount of exodus by investment funds away from commodities,” he commented. So “in the long term, fundamentals do play a role” in copper’s price, Pickard continued. “When you see decreasing [inventories], those fundamentals do support prices,” he remarked. While copper pricing has held near the $2.20 per pound range in the first quarter of 2016, Pickard said bearish forecasts have been made. “Goldman Sachs sees a $4,000 per metric ton average in 2016 and 2017 ($1.82 per pound), and that’s one of the more bullish forecasts,” he stated. Despite the…