Amid weak Chinese industrial data, conservative experts have warned record copper prices could be unsustainable
\nBut investment banks continue to be bullish on the outlook for prices of the red metal
\nMiners fall to the end the week<\/p>\n
Nothing gets the juices flowing right now more than a bit of copper.<\/p>\n
Case in point, this BHP (ASX:BHP)<\/strong><\/a> stab and Anglo American, which took yet another twist as the Big Australia saw a $73 billion carted back to the pavilion by its target with a one-week extension given to bring in the Decision Review System and convince the London-listed miner before May 29.<\/p>\n It only really wants the South American copper mines, and to some extent the met coal, forcing BHP to get creative with the rest of Anglo\u2019s assets, making up almost a third of the deal consideration with a spin-off of Anglo\u2019s stakes in its South African platinum and iron ore business.<\/p>\n Effectively, it would see BHP pay Anglo shareholders to take assets it doesn\u2019t want off its hands. Curious, and a key point that complicates any deal.<\/p>\n While Anglo is yet to be charmed by BHP\u2019s approach, the big miner does have one thing on its side.<\/p>\n In order to present an alternative to the BHP bid, Anglo\u2019s CEO Duncan Wanblad had to lay out a radical proposal to change strategy, which also includes shunting its platinum assets, along with the De Beers diamond business.<\/p>\n That\u2019s got ratings agencies a tad nervous.<\/p>\n \u201c\u2026 if Anglo American pursues its stand-alone strategy focused on maintaining only its copper and iron ore activities, we foresee a much smaller portfolio of commodities that is likely to result in a weaker business risk profile,\u201d S&P said.<\/p>\n \u201cThat said, any potential rating action would also consider other aspects not currently fully known, including its financial policy, leverage, and potential execution risks in the demerger\/disposal plans.\u201d<\/p>\n It\u2019s too early to say what BHP\u2019s credit outlook would be given the complex nature of the transaction, though it should be noted its approach to Anglo came at a time of weakness for the prey, downgraded by S&P in March after some ordinary production and financial results.<\/p>\n \u00a0<\/p>\n Oh yes, copper. The commodity is very in vogue, so much so that BHP is willing to wade through these uncertainties to get its paws on Anglo\u2019s Los Bronces, Quellaveco and Collahuasi stakes.<\/p>\n Exuberance, in particular from traders going long in America\u2019s speccy Comex market, has pushed prices up to record highs, hitting a close of US$10,889\/t on Monday.<\/p>\n They have since pulled back to US$10,419\/t. That\u2019s still spectacular by historic standards, but came after Chinese end users significantly cut production levels, taking some of the froth out of copper markets.<\/p>\n \u201cChinese fabricators are expected to cut run rates at factories to 66% of capacity this month, according to a survey conducted by Shanghai Metals Markets,\u201d ANZ Research noted.<\/p>\n \u201cThat would be the lowest levels for the season since 2017. More than 60% of copper rod plants have also cut their output, according to Mysteel Global. The softness in demand is also showing up in inventories, with stockpiles at warehouse monitored by Shanghai Futures Exchange hitting their highest ever level for this time of the year.\u201d<\/p>\n ING was also critical of the role speculation had played in pumping up copper prices in the face of weaker fundamentals in China, the largest purchaser of copper concentrate.<\/p>\n \u201cSpeculators have been piling into copper on the bullish narrative around tightening supply. However, recent price action is detached from short-term fundamentals, which are less supportive,\u201d ING warned.<\/p>\n \u201cDemand indicators from China are still poor. SHFE copper stocks are at record highs for this time of year, refined import premiums into China are zero and the strength in global prices should see increasing volumes of refined copper coming out of China.<\/p>\n \u201cWhile it is difficult to call a top in the current market, we do not believe the recent move is sustainable. We only need to look at the recent price action in cocoa and coffee to see how quickly this trend can reverse as speculators head for the exit.\u201d<\/p>\n While the vast bulk of experts remain bullish on copper long-term, it\u2019s a reminder that scepticism is alway to some extent healthy.<\/p>\n On the other hand, analysts at investment banks have grown more bullish. Citi\u2019s Max Layton said the run to more than US$10,500\/t was appropriate, but that prices would consolidate rather than surge higher as higher scrap consumption cut into its projected deficits and China\u2019s economy failed to fire.<\/a><\/p>\n Macquarie meanwhile lifted its 2024 price target by 7% to US$9,671\/t,\u00a0<\/strong>its 2028 target 15% to US$11,500\/t and its long term real price by 7% to US$9000\/t.<\/a><\/p>\n \u00a0<\/p>\n Yet copper stocks were, largely, higher save for the big and expected hit taken by equity raiser AIC Mines (ASX:A1M)<\/strong><\/a>.<\/p>\n Less impressive were goldies, mostly in the red thanks to strong US Treasury yields.<\/p>\n Minutes of the last US Fed meeting showed the Board of Governors said recent data had not increased confidence American inflation was moving sustainably to 2%.<\/p>\n \u201cParticipants noted disappointing readings on inflation over the first quarter and indicators pointing to strong economic momentum, and assessed that it would take longer than previously anticipated for them to gain greater confidence that inflation was moving sustainably toward 2 percent,\u201d the minutes stated.<\/p>\n China exposed iron ore and battery metals stocks also fell into the red as the ASX materials sector ended the week with a 0.78% drop on Friday.<\/p>\n \u00a0<\/p>\n NRW Holdings (ASX:NWH)<\/strong><\/a> (mining services)\u00a0 +2.8%<\/p>\n Aurelia Metals (ASX:AMI)<\/a><\/strong> (copper) +2.6%<\/p>\n <\/strong>Sandfire Resources (ASX:SFR)<\/strong><\/a><\/strong>\u00a0 (copper) +2.2%<\/p>\n 29Metals (ASX:29M)<\/strong><\/a> (copper) +2%<\/p>\n \u00a0<\/p>\n AIC Mines (ASX:A1M)<\/strong><\/a> (copper) -9.3%<\/p>\n Emerald Resources (ASX:EMR)<\/strong><\/a><\/strong> (gold) -4.5%<\/p>\n Deep Yellow (ASX:DYL)<\/strong><\/a> (uranium) -3.5%<\/p>\n Lynas (ASX:LYC)<\/strong><\/a><\/strong> (lithium) -3.5%<\/p>\n \u00a0<\/p>\n <\/span>\u00a0<\/p>\n \u00a0<\/p>\n <\/span>\u00a0 The post Monsters of Rock: Is this copper run \u2018unsustainable\u2019?<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"But what of copper?<\/h2>\n
Let\u2019s go to the market<\/h2>\n
Today\u2019s Best Miners <\/strong><\/strong><\/h2>\n
Today\u2019s Worst Miners <\/strong><\/strong><\/h2>\n
Monstars share prices today<\/h2>\n\n
ASX 300 Metals and Minings Index today<\/h2>\n\n
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