Seeking Alpha
, Portfolio123 (2,300 clicks)
Long only, value, research analyst, dividend investing
Profile| Send Message|
( followers)  

The first part of this article published here, introduced the demand for copper; this 2nd part will discuss the tendency of copper supply and reserves.

Mine Production

The total world copper mine production rose from 3.294 million metric tons in 1960 to 16.035 million metric tons in 2011, while the Compound Annual Growth Rate (OTCPK:CAGR) was 2.80%. At this point, the growth rate was little less than the world copper demand.

Source: The International Copper Study Group - ICSG

Source: USGS

Production of Old Copper Scrap

The total world production of old copper scrap rose from 1.074 million metric tons in 1960 to 3.615 million metric tons in 2011, while the Compound Annual Growth Rate [CAGR] was 2.41%. The increase in the price of copper has made its recovery more profitable.

Source: The International Copper Study Group - ICSG

World Proven Copper Reserves

The total world proven copper reserves rose from 310 million metric tons in 1994 to 690 million metric tons in 2011, while the Compound Annual Growth Rate (OTCPK:CAGR) was 4.82%. It means that new discoveries and new mining technologies surpass the quantity of copper that has been mined.

Source: USGS

The International Copper Study Group - ICSG, released its Copper: Preliminary Data for April 2012 on July 20, 2012, according to this report:

In the first four months of 2012, world mine production increased by 1.8% compared with production in the same period of 2011. Concentrate production declined by 0.5% while solvent extraction-electrowinning (SX-EW) was up by 10%. Increases in Chile (1%) China (28%), Democratic Republic of the Congo (23%), Mexico (32%) and the United States (8%) more than offset declines in Indonesia (51%) and Australia (1.6%). On a regional basis, production rose by 1.9% in Africa, 0.5% in Asia, 2.6% in Europe and 2.8% in the Americas, but declined by 3.2% in Oceania. The average world mine capacity utilization rate for the first four months of 2012 decreased slightly to 77% from 77.6% in the same period of 2011.

Summary

Copper demand is growing at a higher rate than the supply. As of the end of June, copper stocks held at the major metal exchanges (LME, COMEX, SHFE) totaled 444,127 tons; a decline of 100,484 tons from stocks held at the end of December 2011, and a decline of 1,324 tons of stock levels at the end of May 2012. Compared with May levels, stocks were down at COMEX and SHFE and up at the LME. According to preliminary ICSG data, the refined copper market balance for April 2012 showed a production deficit of 104,000 metric tons.

According to Chile's state-owned copper giant Codelco, by far the biggest world copper producer, they have not seen the effects of a slowdown in China on its copper exports, nor the prices it receives. China is responsible for more than 40% of the global consumption of copper, and more than half of Chile's exports end up in the country. Chile's deputy mining minister, Pablo Wagner, said on June 26, 2012 that exports should rise 5% - 6% in 2012 during the next year, and that signs of demand, shipments and inventories continue to be solid.

All this, and the fact that the real price of copper is not in its historical highest values today, brings us to the conclusion that now might be an appropriate time to start a long term investment in copper.

Some ETFS and ETNS for Copper:

The only U.S. traded copper ETN with reasonable volume (average 220,000 a day) is:

iPath DJ-UBS Copper TR Sub-Idx ETN (NYSEARCA:JJC).

The other U.S. traded copper ETFS and ETNS have very small assets and are traded in very low volume:

United States Copper (NYSEARCA:CPER).

iPath Pure Beta Copper ETN (NYSEARCA:CUPM).

VelocityShares 2x Inverse Copper ETN (SCPR).

VelocityShares 2x Long Copper ETN (LCPR).

Source: Time To Buy Copper? Part 2