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| Red metal running out? Copper may hit $20,000 amid global shortage – Bank of America | Red metal running out? Copper may hit $20,000 amid global shortage – Bank of America |
| (4 months later) | |
| Gradually widening supply and demand deficits may lead to a global shortage of copper, pushing the price for the metal to $20,000 per metric ton in as soon as four years, Bank of America (BoA) warns. | Gradually widening supply and demand deficits may lead to a global shortage of copper, pushing the price for the metal to $20,000 per metric ton in as soon as four years, Bank of America (BoA) warns. |
| Copper inventories measured in tons are currently standing at levels seen 15 years ago, able to cover just three weeks of demand, Michael Widmer, a commodity strategist at the US’ second biggest bank, said in a note seen by CNBC. | Copper inventories measured in tons are currently standing at levels seen 15 years ago, able to cover just three weeks of demand, Michael Widmer, a commodity strategist at the US’ second biggest bank, said in a note seen by CNBC. |
| “Linked to that, we forecast copper market deficits, and further inventory declines, this year and next,” the analyst said. | “Linked to that, we forecast copper market deficits, and further inventory declines, this year and next,” the analyst said. |
| “With inventories close to the pinch-point at which time spreads can move violently, there is a risk backwardation, driven by a rally in nearby prices, may increase,” he added. | “With inventories close to the pinch-point at which time spreads can move violently, there is a risk backwardation, driven by a rally in nearby prices, may increase,” he added. |
| A rise in volatility resulting from falling inventories was not without precedent, according to Widmer, who said that nickel shortages in London Metal Exchange warehouses in 2006-07 triggered a surge of more than 300% in nickel prices. | A rise in volatility resulting from falling inventories was not without precedent, according to Widmer, who said that nickel shortages in London Metal Exchange warehouses in 2006-07 triggered a surge of more than 300% in nickel prices. |
| BoA expects prices for copper to spike to $13,000 per ton in the upcoming years after hitting $10,000 last week for the first time in nearly 10 years. | BoA expects prices for copper to spike to $13,000 per ton in the upcoming years after hitting $10,000 last week for the first time in nearly 10 years. |
| “If our expectation of increased supply in secondary material, a non-transparent market, did not materialize, inventories could deplete within the next three years, giving rise to even more violent price swings that could take the red metal above $20,000/t ($9.07/lb),” Widmer said. | “If our expectation of increased supply in secondary material, a non-transparent market, did not materialize, inventories could deplete within the next three years, giving rise to even more violent price swings that could take the red metal above $20,000/t ($9.07/lb),” Widmer said. |
| High prices for copper were additionally boosted by a weaker dollar and increasing moves toward green infrastructure, according to David Neuhauser, founder and managing director of US hedge fund Livermore Partners. | High prices for copper were additionally boosted by a weaker dollar and increasing moves toward green infrastructure, according to David Neuhauser, founder and managing director of US hedge fund Livermore Partners. |
| “I think copper is the new oil and I think copper, for the next five to 10 years, is going to look tremendous with the potential for $20,000 per metric ton,” Neuhauser told the media. | “I think copper is the new oil and I think copper, for the next five to 10 years, is going to look tremendous with the potential for $20,000 per metric ton,” Neuhauser told the media. |
| The strategist added that there are some very solid small cap companies that have massive production potential, and valuations are attractive and could make a great return on investment. | The strategist added that there are some very solid small cap companies that have massive production potential, and valuations are attractive and could make a great return on investment. |
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