Goldman Sachs Says Copper Is In Short Supply (JJC, FCX, XSRAY, FQVLF, BHP)

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November 4, 2011 1:12pm NYSE:JJC

Scott Martin: While the smart guys at Goldman Sachs made waves a few weeks ago saying that European demand for copper was tapering off, they now seem to be reversing course by pointing to a serious lack of supply.

Fawzi Hanano at Goldman sees global copper production edging up just 1% this year, which will provide roughly 19 million tons of the key industrial metal (NYSEARCA:JJC) — often considered a proxy for construction and manufacturing activity —  to the world’s factories.

Unfortunately, China’s ongoing demand for copper still leaves the market 300,000 tons short, even if Europe enters a recession.

The ongoing strike at Freeport McMoRan’s (NYSE:FCX) Grasberg mine in Indonesia is not helping.

FCX expects the strike to cut 45,000 tons of production out of its annual output, trimming its overall sales by about 2.5%.

Other key producers like Xstrata (PINK:XSRAY) and BHP Billiton (NYSE:BHP) are also reporting significant production shortfalls — XSRAY by 4% and BHP by a staggering 24% — as high-grade ore is mined out and lower-quality deposits take time to develop.

Hanano now likes First Quantum (PINK:FQVLF) for its high-grade projects in Central Africa, saying that unlike the major producers the company should be able to boost production 20% a year in the near future.

Written By Scott Martin From Emerging Money

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.

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