Monday, May 29, 2006

Copper demand remains strong

Despite all the arguments from the copper bear camp, such as "$4.00 per pound? That's too high!" and "Copper has gone up too much too fast!", and despite the fact that commodities have gone down quite a lot in the past month, copper prices are still near its all time high. As it turns out, copper demand is extremely strong, and supplies are tight, as revealed by the article here. In this article, it says:

Stockpiles in LME warehouses fell 1.1 percent to 105,625 metric tons on May 26, the lowest since Feb. 21. That's equivalent to about two days of global consumption. Copper may rise as much as 50 percent in the next year as demand from hedge funds and cablemakers outstrips supply, according to Sucden U.K. Plc, which trades on the LME.

As I've stated many times before, as long as demand exceeds supply, the price will go up. Yes, I acknowledge that there's tons of speculation already baked into the copper price, but these speculators could run up the copper price a lot more if the copper users are willing to buy at any price.

Disclosure: My current positions are: Freeport Mcmoran Copper (FCX) and Valero Energy Corp (VLO) . As of the current moment, I am only playing a retracement of the correction, but that may change depending on how they do the next few days.

Update: I sold both for pretty nice profits. I don't like the fact that non-commodity stocks are acting weak Monday morning. If they go down, commodity stocks will likely follow. Also, I was disappointed in VLO...the oil sand stocks went up so much, and VLO underperformed badly.

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