Copper prices are on the rise and are at decade high levels. What is driving this up move and where are prices headed?
Jonathan Barratt, CIO of Probis Securities said, “I suppose infrastructure programs which lasts for some time in a market which is forecast to be in a deficit will kick prices higher. We are in a backwardation at the moment and that suggests that prices will remain relatively solid.”
He expects to September 2011 highs. He said that so far the macros suggest copper prices can reach those levels and go through them.
“The supply shortage could last anywhere up to 6 months. We look at it against the backwardation in the market, and you can look at the September 2011 highs of 10,000-10,500. If more stimulus continues, you can see it pushing through those levels. So, yes the big question we are asking ourselves is, are we in a super cycle, is this just another kick on and will prices go even higher than that. So far, the macros are suggesting we can reach those levels and go through them.”
Domestically, Amit Dixit of Edelweiss Securities said, “In terms of our own stocks that we have, they are more tuned to treatment and refining charges (TC/RC) per se. So, we have to be little bit discerning over here. The high level of LME price would possibly benefit only Hindustan Copper, a stock that we don’t have under formal coverage. Hindalco and Vedanta I don’t see any impact because TC/RC margins typically when supply remains constrained, TC/RC margins also remain quite low. So, Hindalco and Vedanta are rallying because of general rally in other base metals.”Watch video for more.