Commodities | May 03 2012
This story features OZ MINERALS LIMITED. For more info SHARE ANALYSIS: OZL
Inventories in the copper market continue to come under pressure and as we have seen a good lift in prices already, we can suggest the trend is here to stay for a little while longer. Why would this be the case when all we hear on the wires is a negative economic outlook and possibility that the slow economic growth will be the rule rather a short-term trend?
This is where it becomes interesting. Last week we discussed the on going demand associated with the massive infrastructure spends in India and China. This we know will continue; however if you combine this known fact with continual draws in inventories around the world then a picture of a shortage in supply emerges. Adding weight to this argument is the low grades of ore in some old mines which is driving cost/production, and you great recipe for prices to remain strong. As we have noted in past Bulletins we have expected a 360,000-ton deficit, however this has taken time to draw out.
The reason for this is the lack of demand we have been experiencing from the continual issues in Europe and the strength of the recovery in the US. Actually it has been a good aspect for copper prices as the slow down has helped to head off a squeeze in demand and hence process rises.
The current move in copper is all about supply not demand and the fact that at the moment we just do not have enough on hand to meet the anemic demand is keeping prices buoyant. It was heartening to finally hear several equity analysts start to look at the supply side for the metal and as such recommend a few stocks. For those of you looking at equities their picks in Australia were PanAust ((PNA)) and OZ Minerals ((OZL)).
We successfully rolled out of our old position and remain long looking for a move through to US400. Strong for longer is the catch cry.
Chart Point
Our prudence to hold onto the position has paid off. Major support stands at US360 and resistance US395 and US400. Momentum indicators remain supportive however are getting to the top end of the range. Even though they are above 80-percentile band on the Stochastic it is not a sign to sell. If nervous about the positions stops can be placed at US358. However US368 is an important support level.
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For more info SHARE ANALYSIS: OZL - OZ MINERALS LIMITED
