{"id":60459,"date":"2012-08-23T10:06:20","date_gmt":"2012-08-23T00:06:20","guid":{"rendered":"http:\/\/www.fnarena.com\/index.php\/2012\/08\/23\/has-bhp-left-an-olympic-sized-hole-in-copper\/"},"modified":"2012-08-23T10:06:20","modified_gmt":"2012-08-23T00:06:20","slug":"has-bhp-left-an-olympic-sized-hole-in-copper","status":"publish","type":"post","link":"https:\/\/staging.fnarena.com\/index.php\/2012\/08\/23\/has-bhp-left-an-olympic-sized-hole-in-copper\/","title":{"rendered":"Has BHP Left An Olympic-Sized Hole In Copper?"},"content":{"rendered":"
\n\tBy Jonathan Barratt<\/span><\/div>\n
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\n\tBHP<\/span> Billiton<\/span> ((BHP<\/span>)) announced its annual net profit was down 34.8%. This reflects the current sentiment in the market towards the resource sectors. As we have mentioned before if Chinese growth slows so too will demand for the Australian inputs and thus a reduction in profitability is assured. One of the interesting aspects of the profit report was that the miner decided to mothball the US$30 billion Olympic Dam copper-uranium project. BHP<\/span> CEO Kloppers<\/span> in his announcement suggested that BHP<\/span> would pursue a less capital-intensive option to replace the underground mine. This in our analysis provides and interesting aspect for supply of copper to the market going forward which we feel is worth noting.<\/p>\n

\n\t\tAt the beginning of the year we expected a deficit in the supply of copper to the market, noting that ongoing demand from China will keep prices buoyant. China in 2011 accounted for 39% of global demand with the US only 9.2%. As it panned out we did not see a recovery in the first part of 2012, in fact the very opposite. The market and prices have only been held up on the chance of stimulus and more stimulus. So far with the slowing global economy reducing the demand from China all is good and the price is stable. This is a convenient play for the supply, as it satiated demand. However, whilst demand for the product came off the boil globally, mining companies reacted by reducing projects, culling any expansion and laying off workers.<\/p>\n

\n\t\tRe BHP<\/span>'sannouncement on the Olympic Dam project. This is particularly worrying for us, as when the recovery mode starts for the global economy then we question ….do we have sufficient supply of the metal in warehouses to meet the expected demand?<\/strong> LME inventories continue to slip and are currently standing at 234,150 tonnes after the sixth weekly drop in seven weeks and this during a period of weak physical demand. Last weekend we saw that housing prices in Chine picked up and with renewed confidence starting to appear in the US, and optimism growing in Europe, we feel that as the market comes back from holiday and Chinese demand picks up before their holidays then the emergence of a deficit in supply is just around the corner. And the copper market will trade higher.<\/p>\n

\n\t\tAt the moment we remain long the metal and as noted last week it has been a long hard trade and very hard to hold on to the position. Yet we have. However, at the present we feel more confident that we will see a break to the topside and will be ready to add to out positions when it does.<\/p>\n

\n\t\tChart point<\/u><\/p>\n

\n\t\tAs suggested, copper is in a range US355<\/span> is the top end and US330 is the lower end.  We have failed to get a break below support and in fact the market has edged higher through near term resistance. The consolidation continues, however be careful about long positions as momentum indicators are at the top end of the band. A break of US350 sets the scene.<\/p>\n

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\n\t\tEdited by Jonathan Barratt, Barratt's Bulletin is a weekly subscription newsletter that provides expert analysis of commodity markets, global indices and foreign exchange movements. Click here <\/a>to take a no obligation 21-day trial to Barratt's or to learn more visit www.barrattsbulletin.com<\/a>. Content included in this article is not by association necessarily the view of FNArena (see our disclaimer).<\/em><\/div>\n<\/div>\n

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\n\tThis report is not, and should not be construed as, an offer to buy or sell, or as a solicitation of an offer to buy or sell, products, securities or investments. This report does not, and should not be construed as acting to, sponsor, advocate, endorse or promote products or any other products, securities or investments. This report does not purport to make any recommendations or provide any investment or other advice with respect to the purchase, sale or other disposition of products, securities or investments, including, without limitation, any advice to the effect that any related transaction is appropriate for any investment objective or financial situation of a prospective investor. A decision to invest in securities or investments should not be made in reliance on any of the statements in this report. Before making any investment decision, prospective investors should seek advice from their financial advisers, take into account their individual financial needs and circumstances and carefully consider the risks associated with such investment decision.<\/i><\/p>\n

\t <\/p>\n","protected":false},"excerpt":{"rendered":"

Jonathan Barratt of Barratt’s Bulletin discusses the impact of the Olympic Dam decision on global copper supply.<\/p>\n","protected":false},"author":8,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[23],"acf":[],"_links":{"self":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/60459"}],"collection":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/comments?post=60459"}],"version-history":[{"count":0,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/60459\/revisions"}],"wp:attachment":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/media?parent=60459"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/categories?post=60459"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/tags?post=60459"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}