While there will be a temporary glut in the copper supply in the early part of 2011, as the year goes on, expectations are things will tighten up and after a period of correction, prices will soar, driving up shares of mining giants like BHP Billiton (NYSE:BHP), Freeport-McMoRan (NYSE:FCX), Rio Tinto (RIO) and Teck Resources (NYSE:TCK).
Part of the problem at this time is the poor ore grades the copper giants are hitting, which in the longer run will increase costs, but also the price of copper as the market tightens on the lower supply.
The other good news for the miners with significant copper exposure is these conditions should continue on over the next several years, as demand continues to be strong.
Along with declining ore grades, other factors include delays to mine expansions and disruption from strikes.
The scenario will change when the giant copper deposit at Oyu Tolgoi mine in Mongolia goes online in 2013, where about 450,000 tons of copper is expected to be produced annually. Those benefiting from that will be Ivanhoe Mines (NYSE:IVN) and Rio Tinto.
For now, there will be a temporary copper glut and then everything will begin to tighten as the year goes on, pushing prices up as high a 18 percent, according to analysts.
Tuesday, April 5, 2011
Teck (TCK) (BHP) (FCX) (RIO) Will Soar on Copper Rebound
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