Investing in the Copper Market
The Copper Bull Market: Unearthing Profitable Opportunities with This Red-Hot Metal
An Investment U White Paper Report
By Tony Daltorio and the Investment U Research Team
Though it isn't as flashy as gold, silver and oil, copper ranks up high on the commodity list.
Its price is often a very reliable indication of the health of the global economy, considering how much of the world's infrastructure – transportation, telecommunications, construction, etc. – rely on copper.
Yet the metal is often dismissed by Wall Street as just another commodity. And at first glance, who can blame them? After all, it's much more fun to look at the latest Apple (NASDAQ: AAPL) gadget.
Still, copper can be just as profitable… if not more…
Copper: The Demand Story
Much of the growing global demand for copper doesn't come from the U.S. or Europe.
Instead, it comes from emerging economies around the world, their rising living standards and increased infrastructure projects. The rapid rise of a middle class in emerging markets has led to dramatic increases in demand.
Unsurprisingly, much of that stems from China, where as much as 25% of the population is now considered middle class. And that figure may double over the next decade.
As people move from one class bracket into higher ones, they automatically begin seeking out better lifestyles. That includes better housing, which means an increase in residential construction. And that means more wiring for electricity, more plumbing and more basic electrical appliances… all of which require huge amounts of copper.
Along with that, China is committed to spending at least $585 billion on such projects and India is projected to spend over $500 billion by 2015. All in all, Asia (excluding Japan) could shell out a total of roughly $1.4 trillion in the next few years on infrastructure.
The Washington-based construction consulting firm, CG/LA Infrastructure LLC, expects China alone to account for over 28% of global infrastructure spending over the next two decades. The nation has obviously changed the game and the historical supply/demand trends with its voracious demand.
In the past year or so, copper prices have largely moved in tandem with the Chinese economy. So when its government increased the level of reserves banks have to hold in order to curb lending, the real estate suffered and so did the reddish commodity.
Naturally, that has caused investors to wonder how long that downturn will continue. If it does, Chinese traders might have some difficulty financing their physical inventories. And if that happens, they may dump the supplies onto the market, which could lead to lower prices.
Fortunately, most industry insiders see Chinese demand as…
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