Copper ETFs: Strong News For Copper Coming Out Of China (JJC, FCX, SCCO, TCK)
The schizoid trajectory of the copper market looks set to take another leap upward as Chinese manufacturers start hoarding the key metal once again.
Demand for copper in China has pushed prices in Shanghai to $120 a ton above what that much metal would earn on the London spot market.
Local traders say they are fielding a lot of interest in copper, which has already rebounded 7% worldwide off its May 12 low.
What does this mean? Other than highlighting the upside for iPath DJ-UBS Copper TR Sub-Idx ETN (NYSE:JJC) and similar copper portfolios, it means that China stepped away from the copper market for the last six to eight weeks deliberately, not out of any sudden economic weakness.
Now that Chinese companies have ground down their inventories, they need to fill up their warehouses again.
Remember, they still need tremendous amounts of copper to build out their electricity grid. Forget the housing numbers. If nothing else, this is an infrastructure play in a power environment that desperately requires investment.
Scrap prices are tightening and no less a name than Goldman Sachs is urging clients to get back long on copper.
Needless to say, you have got to love the charts on Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX), Southern Copper Corp. (NYSE:SCCO) and ANTOFAGASTA PLC ORD (ANFGF.PK).
Even Teck Resources Limited (NYSE:TCK) gets a ride here:
Emerging Money provides insightful and timely information about the increasingly important world of Emerging Market investments. CNBC Emerging Markets Contributor Tim Seymour leads the team of Emerging Money to bring you cutting edge global news and analysis.
About Tim Seymour: Tim is a founder of Emerging Money. He is a founder and Managing Partner at Seygem Asset Management, and The Emerging Markets Contributor to CNBC. Seygem Asset Management focuses on investing throughout the global emerging markets asset class. With a view that emerging and developing economies will continue to outpace the economic growth and advancement of developed economies, Seymour has devoted a career to investing in the dominant markets of tomorrow, today. Seymour’s career has included significant experience in both alternative asset management (hedge funds) and capital markets, having launched two hedge funds, and built the largest Russian broker dealer in the USA. Seymour started his career at UBS, focusing on international credit (cash, swaps, forex) in a specialized hedge fund group (New York). Seymour completed the firm’s training program after graduating with an MBA in international finance from Fordham University. Seymour received his undergraduate degree at Georgetown University.