Why Copper Prices Could Go Either Direction

Although copper prices per ton have been rebounding over the last couple of days, it isn't clear as to whether or not it has really found a bottom as some think, or it still has a way to go before bottoming out.

Bank of America Merrill Lynch (NYSE:BAC) is among those that believe copper isn't close to leveling off, as it projects it to drop to about $5,000 per ton over the next year; even after plunging about 9 percent so far in 2015.

In 2014 it was down 14 percent on the year.

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BHP (BHP), RIO (RIO) Jump on Rising Commodity Prices

Rising gold, silver and copper prices are pushing up the share price of diversified miners BHP Billiton (NYSE:BHP) and Rio Tinto (NYSE:RIO), as safe haven status and growing copper demand offers the commodities support and growth.

Copper demand and prices are rising on the fact that Japan will need a tremendous amount to rebuild the country. Other commodities like aluminum and steel will also generate strong demand over time.

Gold is up on the various geo-political and economic crises around the world, with the never-ending sovereign debt crisis in the EU again adding fuel to the fire.

Silver continues to rise on an alternative to gold as well as demand as an industrial metal.

BHP was trading at $ 90.94, gaining $0.92, or 1.02 percent, as of 2:20 PM EDT. Rio Tinto was at $68.57, up $1.05, or 1.56 percent.

Ivanhoe (IVN) CEO Likes Copper, Iron Ore

With the eventual start of the reconstruction in Japan, Ivanhoe Mines (NYSE:IVN) Chief Executive Officer Robert Friedland said he's bullish on iron ore and copper prices in the near future.

"What happened in Japan is insanely bullish for copper," Friedland said at the Mines and Money conference in Hong Kong.

"I'm a copper bull, not really a gold bull," he added.

With damage to infrastructure and buildings estimated as high as $308 billion, it'll take years for Japan to rebuild, and it's sure to be a boon to the two commodities when combined with ongoing demand from China, and to a lesser extent, India.

More than likely it'll also extend the ongoing bull market beyond the years it was expected to last. It's anyone's guess now as to the length of time some raw materials will continue to rise in price.

Ivanhoe closed Tuesday at $26.36, gaining $0.28, or 1.07 percent.

Freeport-McMoRan (NYSE:FCX) Gets PT Boost from Deutsche Bank (NYSE:DB)

Freeport-McMoRan (NYSE:FCX) received a big increase in their price target from Deutsche Bank (NYSE:DB), citing their belief copper will drive the earnings of the company, and will remain strong in 2011.

Freeport has a strong exposure to copper, being the #2 producer in the world, with a 10 percent market share. They are the largest publicly traded copper company in the world.

Their exposure to gold in relationship to revenue for the company is 12 percent.

Deutsche Bank maintains their "Hold" rating on Freeport, but increased their price target on them from $95 to $135. Freeport was trading at $121.78, gaining $1.85, or 1.56 percent, as of 2:08 PM EST.

Goldman (NYSE:GS) Says Precious Metals Will Lead Commodities in 2011

Talking commodities today concerning 2011, Goldman Sachs (NYSE:GS) said they see precious metals leading the way, with gold reaching $1,690 in 12 months, while livestock performing the worst in the commodity sector.

Over the next year, Goldman sees precious metals rising 28 percent and livestock increasing by only 4 percent.

Goldman said in the report, “Extreme weakness in U.S. demand over the past two years has allowed China to grow unconstrained without any competition for raw materials. This is likely to change in 2011 with a stronger U.S. that is likely to bump up against a China that is consuming dramatically more commodities than pre-crisis.”

In order to cut back on American consumption, commodity prices will probably be pushed up in order to “to make room for further Chinese demand,” according to Goldman.

Precious metals specifically identified as being most affected were platinum and copper, and other commodities to be affected said Goldman, will be soybeans, cotton and crude oil.

As far as gold demand and prices, Goldman concluded, “A low U.S. real interest-rate environment will continue in 2011, particularly given the resumption of quantitative easing measures in the U.S.,” the analysts wrote. “However, as we look toward 2012, we find it timely to reiterate our view that at current price levels gold remains a compelling trade, but not a long-term investment.”

Freeport (NYSE:FCX), BHP (NYSE:BHP), Rio (NYSE:RIO) Up on Commodities Strength

Diversified major miners like Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX), BHP Billiton (NYSE:BHP) and Rio Tinto (NYSE:RIO) all ended Tuesday's session positive, as the broader commodity market, including copper, was able to overcome the relatively soft price of gold, which plunged on the day.

A number of commodities, including copper, are going to struggle to meet demand in 2011, and that bodes well for the commodity market, even if some of the individual commodities aren't in the same place.

Overall, it appears commodities are segmenting, and investors will have to pay closer attention to individual demand and weighing, rather than considering them as a whole, which has been working during the bull market.

Freeport closed Tuesday at $110.63, up $0.73, or 0.66 percent. BHP closed at $88.85, up $0.12, or 0.14. Rio reached $71.02, increasing $0.71, or 1.01 percent.

JPMorgan (NYSE:JPM) Mystery Buyer of $1 Billion of Copper

Speculation has finally ended on who the secret buyer of over $1 billion in copper has been, as JPMorgan (NYSE:JPM) was identified as the entity making the acquisitions.

The amount of copper bought by JPMorgan represents over 50 percent of all the metal lodged in official London warehouses.

Similar to silver and the Hunt brothers decades ago, it generated concerns someone was attempting to corner the copper market, creating a shortage and driving up the prices even more than they're already set to rise.

Finding out the buyer was JPMorgan caused some of the tension in the market to ease, as the copper was acquired on behalf of clients, so in reality they don't own the metal directly. Nonetheless, copper is still in the hands of one institution and its clients, giving them pricing power in the market if they continue to hold onto it.

In 2011, copper demand will be stronger than supply by just under 500,000 metric tons, which will continue to drive the price of the metal up.

Since the market became aware of large amounts of copper being acquired, it has risen by 7.2 percent on the LME since November 23. Copper in New York since that same date is up 8.1 percent.

Short term copper price are experiencing "backwardation" at this time, which is where copper needed for immediate delivery is more expensive than copper to be delivered in several months. This implies tight copper supply in the short term.

LME says it holds close to 350,000 tons of copper now, down from the 555,000 it held as of February.

Vale (NYSE:VALE) Expanding Copper Production

In a move to diversify its holdings and profit from rising copper prices, Vale (NYSE:VALE) announced they're increasing copper production by about 45 percent over the next five years, expected to reach 1 million tons annually by 2015.

Vale is the largest producer of iron ore in the world at this time.

Tito Martins, Vale's Executive Director for Base Metals said, "Diversification is part of Vale's strategy. Copper, given current market trends, appears to be an extremely attractive investment."

Production goals before the decision were to extract 691 tons of copper in 2015.

In 2011, copper production estimates for Vale are to produce about 332,000 tons. In 2010 they produced 131,000 tons of copper over the first nine months of the year. That underperformed because of a long strike in Canada.

In the third quarter of 2010, copper production only accounted for less than 3 percent of the revenue for Vale, giving them a lot of room to grow in the years ahead, assuming it'll be profitable and copper retains price support.

Iron ore on the other hand accounted for about 60 percent of revenue in the third quarter.

Vale is also looking to the fertilizer sector as their other main focus for growth.

That is also expected to climb in revenue because of the expectations food prices will continue to rise, increasing margins and providing farmers with more capital to invest.

Copper Demand to Exceed Supply Through 2013 Says GFMS

A report from the GFMS entitled Quarterly Three-Year Copper Forecast, says the supply of copper won't be able to keep up with demand through 2013.

The report concludes copper prices will rise as the copper market continues to be tight throughout that period, although an expected slowdown in the first half of 2011 could result in a temporarily copper surplus.

While production would be expected to meet that growing demand because of plans to increase output, secondary factors such as labor problems, low-quality grades, political effects and other operational risks associated with the industry in general will probably temper the production growth and not allow it to reach desired levels.

Over the next three years refined production is estimated to increase by about 3.4 percent annually through 2013.

The result of all of this in relationship to copper price should be a continual rise in price, which could easily reach above $11,000 a ton in 2013, according to the report.

Even though China may cut back on commodity imports in general and copper imports specifically, they will still account for just under 66 percent of the increase in global copper consumption annually during the time period we're talking about.

Add to this this the growing interest by investors in copper and commodities, and there is sure to be an increased flow of money into the metal.

Bottom line is it seems copper producers and investors are in for a volatile but profitable ride over the next three years.

Freeport (NYSE:FCX), BHP (NYSE:BHP), Teck (NYSE:TCK), Southern Copper(NYSE:SCCO) Plunge on Falling Copper Prices

Copper prices have plummeted today, dragging down heavily-exposed copper companies like Freeport-McMoran (NYSE:FCX), BHP Billiton (NYSE:BHP), Teck Resources (NYSE:TCK) and Southern Copper(NYSE:SCCO).

Much of this was precipitated by the weakening euro versus the U.S. dollar, as the dollar index rose early in the trading session.

There is also the continuing uncertainty as to the demand which will come from China, as it's certain it'll fall from previous estimates as China battles inflationary pressures. Copper demand will remain strong, but not as strong as expected, which will weaken results going forward.

Refined copper imports for China plunged by 30 percent to 169.897 metric tons in October, the lowest level in the last 12 months. Strong domestic supply and higher global prices were the reason behind that fall in demand.

An ongoing weak U.S. housing market is also dragging on the market, and all of these factors aren't going to change any time soon, other than the U.S. dollar, which will continue to be pushed down in value because of the misguided policies of Ben Bernanke and the Federal Reserve.

Freeport was trading at $98.42, falling $3.59, or 3.52 percent at 2:10 PM EST. Tech Resources was at $47.96, dropping by $2.09, or 4.18 percent. Southern Copper fell to $41.97, losing $2.32, or 5.24 percent. BHP Billiton was trading down to $83.27, declining by $3.31, or 3.82 percent.

Freeport (NYSE:FCX), BHP (NYSE:BHP), Teck Resources (NYSE:TCK) Down on China CPI Report

Freeport-McMoRan Copper & Gold(NYSE:FCX), BHP Billiton Limited (NYSE:BHP) and Teck Resources (NYSE:TCK) were all down Friday as uncertainty clouded the demand picture when news China's consumer price index rose to 4.4 percent (higher than what was anticipated), leading to speculation China may tighten the economy by raising interest rates in order to fight inflation.

Gold price obviously plummeted on the news, but the diversified miners also took hits because of the demand factor all continue to rely upon from China.

Copper also took it on the chin, dropping the most in a trading session in four months. In China copper, along with zinc, cotton, rubber, sugar, corn and soybeans fell to their daily limits as concerns not only inflation, but the possibility reserves may be tapped for sales, which would cut demand.

All of this and more is affecting the share price of diversified miners and commodity-based companies, and all eyes are on China as to where the market will go next.

Freeport closed Friday at $103.92, losing $4.09, or 3.79 percent. BHP was down to $86.97, falling by $2.63, or 2.94 percent. Teck Resources closed at $49.12, dropping by $1.07, or 2.13 percent.

Morgan Stanley (NYSE:MS) Sees Base Metals Surge Led by Copper

Morgan Stanley (NYSE:MS) sees base metals rallying in 2011, led by copper.

Expectations are consumption will increase at a time when supply is lower and demand rising.

Peter Richardson, chief metals economist at Morgan Stanley Australia Ltd., said, "There is a fundamental aspect to this rally in addition to what's happening to the U.S. dollar. I rank copper first."

According to the International Copper Study Group, refined-copper production in 2011 will fall behind demand, the first such occurrence since 2007.

With potential shortages not priced fully into copper at this time and the move by Ben Bernanke and the Federal Reserve to implement another round of inflating, or quantitative easing, copper and other base metals will continue to rise, again, led by copper.

Ivanhoe's (NYSE:IVN) Friedland Marketing Up the Company

It's no secret Ivanhoe (NYSE:IVN) is looking for even more financing for its Oyu Tolgoi mine in Mongolia, and Ivanhoe Chairman Robert Friedland has been seen a lot in the news lately letting people know about the incredible project they have in Oyu.

He's been making some interesting comments a la Richard Branson to get the Ivanhoe brand stuck in the minds of potential investors.

Even though he was joking, and in reality probably marketing, Friedland made a comment which made the Oyu Tolgoi mine look like it was valued at trillions of dollars, rather than the approximate $16 billion it is known to be worth.

He also mentioned copper outperforming gold recently, citing the dubious claim that 20 years from now cars are going to be electric, and those cars will need copper for the batteries. That was the hook though, the reality is copper will continue to be in high demand over the next 20 years, and that will have nothing to do with electric cars.

Friedland of course knows this, but he is doing the stir the imagination thing in order to have people associate that with Ivanhoe.

But as far as copper outperforming gold, that would have be on enormous volume, as gold prices will shoot up as soon as the U.S. government or Federal Reserve start do their quantitative easing thing, or printing of money. Rumors are they're moving closer and closer to that in light of the economy stalling and elections coming soon.

Seeing that hasn't worked in the past, and we've never left the recession, unless you think the government throwing money into the economy is a real recovery.

That's why there haven't been any jobs created, the private sector is for the most part doing little or no hiring, and then we hear the news reports of the "unexpected" this and "unexpected" that, when talking about economic news that didn't meat expectations.

For Ivanhoe, once production begins at Oyu Tolgoi, you'll see their stock price shoot up even more, as much of this is in anticipation of the money generating real revenue and profits, and not just potential. They're already up over double the last twelve months, and I think Friedland is trying to create interest in order to land the needed partners to forge ahead and work the extraordinary mine.

Freeport (NYSE:FCX) Earnings Increase 10 Percent in Second Quarter

Freeport McMoRan Copper & Gold Inc. (NYSE:FCX) enjoyed a 10 percent increase in earnings in the second quarter, as higher copper and gold prices helped them to a strong showing, even though production numbers were down.

The miner earned $1.49 a share after excluding one-time items, far above the $1.34 a share analysts had been looking for.

Copper prices surged 38 percent higher on average during the quarter, leading the earnings gains. Copper entails about 75 percent of all sales by Freeport.

Gold also helped the company, as prices were at $1,234 an ounce on average during the second quarter. That was up by 32 percent over last year, which averaged $932 an ounce during the same quarter.

Revenue grew to $3.86 billion a gain of 5 percent, from $3.68 billion last year. Analysts had been looking for $3.66 billion. Again, this was led by higher prices and not increased production.

To get an idea of how the stronger prices helped the company, production last year for copper during the same time period was 1.1 billion pounds, while the most recent quarter was 914 million pounds.

Gold production was at 298,000 for the most recent quarter.

Guidance for the year remained the same, with production of copper estimated at 3.8 billion pounds, and gold production expected to reach 1.8 million ounces. Molybdenum, which could perform strong if the demand for steel increases, which is expected, has an estimated 63 million pounds to be produced for the year.

Freeport was up to $66.74 in New York as of 1:26PM EDT, gaining $2.42, or 3.76 percent.

Freeport McMoRan (NYSE:FCX) Getting Closer Look from Moody's (NYSE:MCO)

Freeport McMoRan (NYSE:FCX) hasn't had a lot of good news on the macroeconomic level lately, and that has caused it to plummet from a 52-week high of $90.55 in January to closing at $61.07 a share on Tuesday.

Consequently, they've had their credit ratings lowered during that time, and word is Moody's (NYSE:MCO) is now reviewing a variety of their ratings to see if any merit being upwardly revised.

Freeport ended Tuesday down $3.59, or 5.55 percent, as the global economic picture seems to be getting bleaker all the time, and consumer confidence is plunging as a result.

Add to this the slowing U.S. housing starts, the Chinese battling inflation in their urban property markets, and the chaos in Europe, and copper doesn't look like it has anything out there to offer it support.

Freeport-McMoRan (NYSE:FCX) Declares Dividend

Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) declared a quarterly dividend on Thursday of $0.30 a share, which will be payable to common stock holders of record as of July 15, 2010, and will be distributed on August 1, 2010.

The Freeport Board of Directors originally announced an annual dividend of $1.20 a share in April, payable in $0.30 increments on a quarterly basis.

The 52-week range of Freeport has been $43.19 to $90.55, closing today at $63.44, a drop of $1.62, or 2.49 percent.

While copper prices have risen over the last three days, demand has plunged along with new housing starts in America, along with China cooling off their hot urban property markets as well.

Freeport (NYSE:FCX) Vulnerable to Weak Housing Market

The recent news that housing starts in the U.S. plunged after the tax credit ended, wasn't good news for copper producer Freeport McMoRan (NYSE:FCX), which has also faced bad news, along with other copper producers, over the Chinese battling inflation in their property market by raising interest rates and limiting the number of properties people can buy.

Add to that increasingly bad economic news from the European Union over its sovereign debt crisis, and as far as their copper business, Freeport is going to struggle for some time, as not much in the way of good economic news is coming from anywhere, confirming we may not have ever left the recession, or at minimum, we're going experience a double-dip recession heading into summer.

There can be no doubt copper prices will fall along with demand, as already seen today in London, where prices fell by 2.5 percent early in the session.

Although Freeport of course mines other metals, copper is their mainstay, and they will be most affected by what happens there, and going forward there isn't much positive to show there is something that will cause copper demand to increase.

Freeport-McMoran (NYSE:FCX) and Uncertainty Over Copper Prices

Freeport-McMoran (NYSE:FCX) is largely dependent on the price of copper as to its success, and the news today that Europe allegedly had improvement in their industrial sector last month added more to the confusion if copper prices than helped it.

As a result, puts and calls were made on both side of the trader aisle, reflecting the uncertainty of the copper market.

Conflicting news and data are behind the uncertainty, as the sovereign debt crisis in Europe threatens the stability of the region, and yet somehow the industrial sector is said to have improved.

Something obviously isn't right there, and traders know there is some type of dishonesty going on, but aren't sure which way to bet against it.

For those who want to invest in Freeport-McMoran, we need to take the demand side of the equation and forget about the countradictory news which on the one side is fueled by government and mainstream media who want the more positive side of things to be the narrative, rather than the obvious challenges facing the region.