positive future outlook of the copper market through its aggressive investment program
We believe this is part of the commodity cycle and a temporary event. We expect, in the following quarters, a recovery of demand, particularly from Asia, which currently represents approximately 60% of the world demand.
Regarding China, its GDP is growing at a rate of 7. 5% per year, generally speaking, due to its urbanization process, we believe that China's GDP growth produces a corporate demand growth higher than its GDP growth rate. We expect this trend to start up again in the next few quarters, as China ends its de-stocking phase.
Even though today, the U.S. represents only 8% of the world demand for refined copper, the ongoing recovery of its economy is a key to copper demand, seems that U.S. is the most important secondary copper consumer market, affecting copper demand in other economies.
On the supply side, despite some evidence of a market oversupply, we think that several structural factors, such as labor stoppages, technical problems, truck shortages and other issues are affecting and will affect copper supply, reducing the net impact of additional production coming from new projects and expansions.
Southern Copper believes that if the world economy continued to improve, it is positioned to take advantage of the positive future outlook of the copper market through its aggressive investment program of organic growth aimed at increasing production from its current capacity to 1 million tons by 2017.
Not so sure about those words......a small POP has occurred replacing depleted inventory which leads demand 6 to 8 weeks. Commodity warehouses are stocking up to fill existing space and seeking more for storage at these low copper prices. I see some production cuts from the mining activity and low copper prices resulting in a shortage down the road. This event will leave the commodity storage warehouse full of cheap copper which they can then move at a higher price once the shortage takes hold. Industry insider's say copper stock supply is being hoarded anywhere they can put it . I think SCCO is a long buy at these prices, but still believe marginal growth for 12 to 24 months out from world supply demand.....things will be slim.
the commodity cycle: yes.
China, not as bad as one was scared: yes.
Housing recovery, and copper demand increase: yeap.
I should have sold SCCO when it was over 40 but I sold 40 calls. Heck, I bought more at under 29. I will hold for a few more years. See you then.
Best of luck,