Copper Still Carries Electricity

The recent decline in the price of copper metal makes an attractive asset for investors in the short and long term.
The metal has dropped 6.4% from record high of $ 4.6375 per pound in February, as a natural disaster and nuclear emergency in Japan intensified the losses caused by China's demand weaker than expected. Friday, the most actively traded copper contract for May delivery was up 0.1% at $ 4.3390.
But market attention is already happening in Japan's problems likely stem from the demand for copper, as the third largest economy in the world rebuilt after an earthquake of 9.0 magnitude and subsequent tsunami. "Everything from the mains, for housing, automobiles, consumer devices will be necessary, and markets around the metal base will benefit from reconstruction efforts," said Max Layton , deputy head of commodities at Macquarie Securities Group. As an element that readily conducts electricity, copper is incorporated into almost all of these elements.
Analysts have been busy calculating how much additional copper Japan will need. Japan brought about 1.1 million metric tons of copper last year, according to analysts at Royal Bank of Scotland. For now, imports have declined as transportation and infrastructure damaged by the quake. However, when the recovery effort gets underway, the purchase of Japan is likely to soar.
Even before the disaster, the world copper demand is expected to outstrip supply this year and next, paving the way for high-price gains. The International Copper Study Group linked deficit this year by 400,000 metric tons, or about 2% of production. Goldman Sachs predicts the price of copper averaged about $ 4.63 a pound in 2011, while Macquarie Group predicts that the average price of $ 5 a pound.
If those forecasts play out, short-term investors entering the market for copper at current prices, about $ 4.20, could make a small profit.
Some have argued that current market prices overestimate copper miners left a wide profit margin, given that the marginal cost, the additional production cost, which amounts to about $ 2.30 a pound.
But the marginal costs of the current account for production in existing mines where reserves are declining and the costs of construction and exploration has long been paid. future supply of copper will reach a much higher price, as the easy-to-mine deposits have been exploited, and mining companies are forced to venture into less politically stable countries with greater confidence and obstacles to development.
Find an important resource takes time, as it does in development. Even a giant like the deposit of Ivanhoe Mines (Symbol: IVN) Oyu Tolgoi in Mongolia's mining use, requires a minimum of five years of development before being ready for production. Ivanhoe associated with Rio Tinto (RIO) in 2009 to fast-track development of the project, expected to begin commercial production in 2013.
Moreover, new fields and expansion projects just to replace current production, ie, supply is likely to remain the same while demand continues to grow.
This means that in the case of long-term investors to enter the metals market now, while copper is relatively cheap.