The standout commodity this week is aluminum while everyone else remains mixed. The shift of favorable risk sentiment will likely remain as a supporting point going forward though sentiment still takes a back seat to Chinese-specific demand. So far, aluminum, as priced on the LME, is up 25 per cent this year, leading copper as the next best performer at 23 per cent.
Aluminium was broadly supported on the view that as demand in China will keep producers happy while raw materials costs are rising and will lead to cost pressures. In addition to rising cost pressure, China is expected to keep constraints in play to reduce and ideally eliminate the illegal excess capacity while consumption in China is expected to rise.
Copper is a long term play where demand would be huge and if supply concerns come in then it will be a force multiplier. Copper ore grade world over is low and hence more resources and mining need to happen to bring out every tonne of copper. The cost of mining copper will go up. Also, Electricity cost will go up as miners are establishing their own solar based power supply. The value dipped dramatically in 2009 during the recession to approximately $1.50 per pound. But the price rebounded by 2012 to an all-time high of approximately $4.50 per pound.
imho Copper should trade above $4 per pound due to low grade concerns and cost going up. EV will consume 50% of all copper supply at present.
Disc: Invested in Hind Copper. Looking to add more at favourable price points.