{"id":23554,"date":"2011-09-01T08:12:07","date_gmt":"2011-09-01T12:12:07","guid":{"rendered":"http:\/\/countingpips.com\/fx\/?p=23554"},"modified":"2011-09-01T08:12:07","modified_gmt":"2011-09-01T12:12:07","slug":"are-copper-stocks-still-a-no-brainer","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2011\/09\/01\/are-copper-stocks-still-a-no-brainer\/","title":{"rendered":"Are Copper Stocks Still a \u2018No-Brainer\u2019?"},"content":{"rendered":"<p><strong>By Aaron Tyrrel<\/strong> <abbr><\/abbr><\/p>\n<p>Investing in copper stocks was a no-brainer back in 2009.<\/p>\n<p>If you bought them then \u2013 and cashed in on the back of the 230 per cent rise in the spot price \u2013 well done!<\/p>\n<p>But forget trying for easy money in copper stocks now\u2026<\/p>\n<p>Yes, demand is still strong. And supply is dwindling.<\/p>\n<p>And the copper price probably won\u2019t fall any time soon.<\/p>\n<p>(In fact, it could still crack $10,000\u2026 even $11,000\u2026 a tonne. And even if copper fell to $6,000 a tonne, copper producers would still turn a tidy profit. That\u2019s how good their margins are\u2026)<\/p>\n<p>But here\u2019s what it boils down to\u2026<\/p>\n<p>Copper has had a great run.<\/p>\n<ul>\n<li>The spot price has more than tripled since January 2009\u2026<\/li>\n<li>Supply is too low\u2026<\/li>\n<li>Not enough new mines are coming online to meet demand\u2026<\/li>\n<\/ul>\n<p>Demand is huge.<\/p>\n<p>The commodity data out of China shows demand is growing. Imports jumped 9.5% to a six-month high in July 2011. China\u2019s imports of \u2018copper scrap\u2019\u2026 Which is just reclaimed copper from buildings and so on\u2026 Jumped to 306,626 tonnes at the same time.<\/p>\n<p>And stockpiles are dwindling.<\/p>\n<ul>\n<li>Glencore reports copper stockpiles in bonded warehouses fell 50% in 2011, after they peaked in February.<\/li>\n<li>The Metals Economics Group says major copper discoveries have fallen \u2018well short of what is needed to replace the copper produced\u2019.<\/li>\n<li>And Morningstar predicts \u201960% of today\u2019s open-pit mines will deplete or go underground (at a higher-cost) by 2021\u2032.<\/li>\n<\/ul>\n<p>Copper is now only 12.5% from its two-year high. And in the highest price range it\u2019s been in since 1998.<\/p>\n<p><strong>And that\u2019s the problem\u2026<\/strong> There\u2019s ZERO upside.<\/p>\n<p>When the copper price is rising, it\u2019s like a floating tide that lifts copper stocks with it.<br \/>\nDemand is relatively strong. And risks to supply are rising. And because of that, prices are likely to be <em><span style=\"text-decoration: underline;\">well supported going forward<\/span><\/em>.<\/p>\n<div align=\"center\"><img decoding=\"async\" src=\"http:\/\/www.moneymorning.com.au\/images\/mm20110901b.jpg\" alt=\"5 year copper spot\" border=\"0\" \/><\/div>\n<p>But you won\u2019t make any easy money on the back of copper price rises.<\/p>\n<p>Though if you\u2019re prepared to do a bit of legwork, you can still make good gains.<\/p>\n<p>Like if you find a stock about to get a takeover bid, you could see a healthy rise. (Like the $7.3 billion cash bid Barrick Gold offered to Equinox Minerals back in April.)<\/p>\n<p>And then there are the explorers. They come out of nowhere, poke a few holes in the ground and if they hit something, their price could go anywhere.<\/p>\n<p>Just take a look at what\u2019s happened for Ventnor Resources.<\/p>\n<p>&nbsp;<\/p>\n<div align=\"center\"><strong>Ventnor Resources 5 July-Present<\/strong><\/div>\n<p>&nbsp;<\/p>\n<div align=\"center\"><img decoding=\"async\" src=\"http:\/\/www.moneymorning.com.au\/images\/mm20110901c.jpg\" alt=\"Ventnor Resources 5 July-Present\" border=\"0\" \/><\/div>\n<p>&nbsp;<\/p>\n<div align=\"center\"><em>Source: Google Finance<\/em><\/div>\n<p>&nbsp;<\/p>\n<p>Or what happened for Horseshoe Metals back in January.<\/p>\n<p>&nbsp;<\/p>\n<div align=\"center\"><strong>Horseshoe Metals Price Chart 21 Jan-1 Feb<\/strong><\/div>\n<p>&nbsp;<\/p>\n<div align=\"center\"><img decoding=\"async\" src=\"http:\/\/www.moneymorning.com.au\/images\/mm20110901d.jpg\" alt=\"Horseshoe Metals Price Chart 21 Jan-1 Feb\" border=\"0\" \/><\/div>\n<p>&nbsp;<\/p>\n<div align=\"center\"><em>Source: Google Finance<\/em><\/div>\n<p>&nbsp;<\/p>\n<p>So while the easy money has dried up for now, there are still profits to be made. And while copper stocks are probably no longer a \u2018no-brainer\u2019, with a little bit of thought, they still present good opportunities.<\/p>\n<p><strong>Aaron Tyrrell<br \/>\nEditor, <em>Money Morning<\/em><\/strong><\/p>\n<p><a href=\"http:\/\/www.moneymorning.com.au\/20110901\/are-copper-stocks-still-a-no-brainer.html\" target=\"_blank\">Are Copper Stocks Still a \u2018No-Brainer\u2019?<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Investing in copper stocks was a no-brainer back in 2009. If you bought them then \u2013 and cashed in on the back of the 230 per cent rise in the spot price \u2013 well done!<br \/>\nBut forget trying for easy money in copper stocks now\u2026<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-23554","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/23554","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/comments?post=23554"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/23554\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/media?parent=23554"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/categories?post=23554"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/tags?post=23554"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}