FYI | Dec 21 2006
The Australian Bureau of Agriculture and Resource Economics (ABARE) spelled it out quite clearly in its commodities outlook for 2007:
“In 2007, global copper prices are forecast to fall by over 8 per cent to average US$6250 a tonne (US284c/lb). Despite the continued likelihood of disruptions to supply because of labor disputes and a shortage of copper concentrates, world refined production is forecast to increase in 2007 by nearly 5 per cent. At the same time, global copper consumption is forecast to increase by over 4 per cent, largely reflecting continued strong growth in copper demand in China. With supply increasing slightly faster than demand, copper stocks are forecast to rise to around 2.3 weeks of consumption, and copper prices to ease, particularly in the second half of 2007.”
And while most industry experts would agree with this assessment, analysts Malcolm Southwood, Paul Gray & Marc Bonter at GSJB Were simply refuse to budge. 2007 will be a bullish year for the red metal they maintain. Being well aware of the current market consensus, the three dissenters published another update on their copper views this week.
“At a time when it appears to be unfashionable to do so”, this week’s report reads, “we are maintaining our bullish outlook for copper”.
A good investor is someone who looks at exactly the same information as everyone else has access to but who thinks what nobody else has thought of before, George Soros said once. Assuming the three GSJB Were analysts don’t have any inside information the rest of the world doesn’t know of yet, what are these guys thinking?
There are no secrets in play, it would seem, with the report giving it all away in the opening paragraph – a rebound in Chinese copper imports in combination with continued supply-side difficulties is expected to keep the global copper market in deficit in 2007.
Investors will have to wait and see how the first six months of the new year will play out to find out who is right and who is wrong. GSJB Were is pretty much on its own when it comes to its view on copper in 2007, but does this also mean its view is incorrect?
If anything the confidence and conviction that emanates from the broker’s copper research reports is striking. GSJB Were forecasts an average price of copper in 2007 of 340c/lb – more than 11% above the estimated average of 305c/lb for 2006.
It just goes to show, nothing in life is certain, particularly when it comes to global finance.
This is my final editorial for 2006. Your FNArena team is taking a hard deserved break from Friday, December 21 onwards. We will be back on Monday January 08, 2007.
It has been a very exciting year for us. Thank you all for supporting us throughout the year. We feel genuinely privileged and are looking forward to adding more services and writing more beautiful stories in 2007 (and beyond).
But first we’re going to have a break…
Happy Holidays to everyone.
Talk soon!
Your editor,
Rudi Filapek-Vandyck
(as always supported by the Fab Three: Greg, Chris and Terry)
P.S. The Tech Wizard sends his best wishes too.