Could Copper Take Off Again?

Array
(
    [0] => Array
        (
        )

    [1] => Array
        (
        )

)

By Greg Peel

Nickel has been the big post-correction winner, having traded 20% above May highs due to constantly falling LME inventories and mine strikes, including the big Voisey Bay mine in Canada.

Copper has only managed to hit highs 15% above May, but UBS suggests this might change.

UBS agrees with mining behemoth Phelps Dodge that it has been Chinese de-stocking of copper inventories that has kept a lid on the price. Were China to start easing off or even stop such de-stocking than there wouldn’t be much to hold the copper price back.

Copper is also facing major supply disruptions in the form of mine strikes. It’s all happening in Chile at the moment, one of the worlds’ largest suppliers. Workers will likely strike at the massive Escondida mine as of next week given reports they aren’t that happy with their recent pay offer. Furthermore, a rock slide at the Chuquicamata mine has halted production as well.

UBS suggests that for investors looking for pure play copper leverage, Aditya Birla Minerals (ABY) is worth a look. June production was disappointing, but the stock is trading at a 30% discount to NPV.

Click to view our Glossary of Financial Terms