Copper prices have slowed their rise over the past three months, with three-month lows being hit earlier this week. While prices have risen again, short term outlooks on copper prices suggest they will fall due to a short term oversupply from China.
However, don't let this short-term bump in the road take your eyes off the long term. Here is why you should still pay attention to long-term copper prices.
Long Term Demand Will Rise
As I pointed out in my recent copper prices article, Jim Rogers and commodities investors are looking toward long-term copper demand for China to keep growing. As Rogers said, he owns copper, but expects to still make more with precious metals and agriculture, especially in the short run.
Still, copper's widespread use in manufacturing means that demand for the metal is strong and as we move into the century of China, it will likely be pushed to a great extent by that Chinese growth.
As the global economy continues to strengthen, its demand will also rise worldwide. This is echoed in the fact that more and more developing countries are investing in technology, whose core components are usually copper infused.
While there is short term sluggishness in Europe due to debt issues in several countries, demand still remains strong in other parts of the world, such as China, the United States, and even South America.
Long Term Supply Constraints
On the supply side, concerns have mounted because of Chinese inventories rising over the past three months, almost doubling.
This is contributing to the short term sluggishness in the price of copper, but many experts think that this will only last for about two to three more months, and then the normal supply vs. demand constraint pricing will prevail. In fact, Codelco's CEO is bullish on copper pricing going into the fall.
Worldwide demand is projected to outstrip supply until at least 2014, when several companies' new mining operations are scheduled to come online. However, as with all new projects, there is no guarantee that these mines will come online as scheduled, and will most likely face delays that could push them back months to years.
Copper Options for Investors
There are plenty of options for investors looking for short-term or long-term exposure to copper prices. Here are the more common options:
COPX is a copper miners index for people looking for diversified copper mining exposure. It picked up from October to February, but has been dropping sense then in renewed fears of economic slowdown, particularly in China.
Freeport McMoRan (NYSE:FCX) -- for people looking to gain exposure into long-term Chinese copper demand. It's dropped by nearly a third over the last 12 months, and could still have further to go. It bet heavily on copper demand in China, so the slowdown is exceedingly rough for this miner. It's likely to be hit hardest by a Chinese slowdown, and is also likely to rebound the most when the Chinese economy begins to heat up again.
Southern Copper Corp (NYSE:SCCO) -- for people looking for a nice dividend as well as copper mining exposure. There are other companies benefiting from possible future copper demand, like Encore Wire Corporation (WIRE).
For people looking to get direct copper exposure in stock/ETF form, JP Morgan Chase is readying a physical copper ETF that could be ready as early as this June.
The best time to increase copper exposure is when signs of the global economy begin to warm up beyond modest growth.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in FCX over the next 72 hours.