CPER - CPER: Long-Term Copper Outlook Is Bullish But Short-Term Caution Advised

2024-05-03 18:22:52 ET

Summary

• Copper prices are up 17% YTD due to resilient demand and supply disruptions.
• Primary supply is likely to remain challenged, because of rising costs, falling grades and political tensions.
• However, I believe bullish bets on copper via United States Copper Index Fund, LP ETF are premature and that prices are going to stay range-bound in the near-term.
• New demand drivers, such as the green energy transition, will overcome the demand destruction from the deflation of the Chinese real estate bubble from the middle of the decade.

Copper held by United States Copper Index Fund, LP ETF ( CPER ) is a hot commodity. Prices are up about 17% year-to-date, as demand remains resilient and primary supply keeps disappointing. In particular, the suspension of production at Cobre Panama , the world’s largest open-pit copper mine, and falling production from some major miners, are pushing the market into a deficit that was not anticipated to materialize until the latter part of the decade . Power cuts in Zambia hit key mines, putting additional pressure on the copper market. Also, lower margins for smelters in China , scrambling to get in-demand copper concentrate to maintain production capacity, may cause a 10% cut in this year's refined copper output. Finally, the large costs of permitting and developing new mines are driving major industry players to attempt M&A activity rather than starting new projects, as proved by the BHP Group (BHP) attempt to acquire Anglo American (AAUKF)....

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