Copper could be over-reaching its grasp

March 22, 2017 12:54 PM

During a rather informative meeting with the Bloomberg Metals Team in New York last week and also add a little information that I have gleaned from a recent interview with the Mining Minister of Chile and  I think it’s time to share with you my current viewpoint on Copper. I have traded Copper at a $1.00 and all the way up to $4.50 during my trading career. As I look at the current level of $2.65-70 from the CME Groups Futures quote board I realized over the years that I have to look much farther into the market than the tick by tick world of speculators. My concern right now is the production of copper ore and when the current strike at Escondida copper mine ends and the Chilean Miners say it is time to restart their operations. Escondida, the World's Largest Open-Pit Copper Mine told management that the new offer just today would not even come under consideration as it was far too low. What that means is copper will hold these levels for a little while longer and also let's not forget that the Trump infrastructure proposal is pending and that's why were still so strong at these levels.

 The problem I’m having presently is these two strong factors are already priced into the market and I'm really starting to look hard at the copper market in general as it is starting to look like it’s thinking about becoming stale. Remember, a bull market has to eat every day. I'm thinking that it will be advantageous in the near term to look for some areas to sell the market against my recyclers and refiners production just to offset the mining/recovery output. Right now we have doubled the copper ore output from 2001 -2011. When you consider that the breakeven point on copper ore is an average $2.10 and what that means is that no matter where you sell your finished product your money ahead. I believe that the larger recapture numbers in recycling; *each year in the U.S.A.., nearly as much copper is recovered from recycled material as is derived from newly mined ore... and when you exclude wire production, most of which uses newly refined copper, the amount of copper used by copper and brass mills, ingot makers, foundries, powder plants and other industries shows that nearly three-fourths (72%) comes from recycled copper scrap. Current worldwide copper resources are estimated at nearly 5.8 trillion pounds of which only about 0.7 trillion pounds (12%) have been mined throughout history... and nearly all of that is still in circulation because copper's recycling rate is higher than that of any other engineering metal.

I think you can now see why I'm looking for an entry point to hedge my people against the coming tide.


About the Author

Pete Thomas of Zaner Precious Metals is an active cash and OTC metals broker for the last 35 years. He can be reached at 312.277.0140 or a