The London Metal Exchange, the world's largest metals
exchange, reports that copper stockpiles from the U.S. to China
are already at 2-1/2-year lows and poised to decline for the
fifth month in a row. The news has awakened the slumbering copper
bulls to move speculation, sentiment and pricing to the highest
level in two months.
In general, global commodities have been moving higher, fueled by
for a 130-billion-euro ($173 billion) Greek bailout to help avoid
a March default.
Coupled with China's
February 18 cut
in reserve requirements for banks -- which goes into effect today
-- and there is plenty of cash out there for industry to buy the
copper they need for everything from construction to power
But the real story here is that
already-tight copper supply
looks to be moving into its third consecutive annual
Between China and the United States, roughly 55% of the
world's copper is already spoken for in one form or another.
China alone consumes nearly 40% of global mine output, which
created a 119,000-ton shortfall in November.
Analysts estimate a copper shortage of 376,000 tons this year
and continued undersupply through 2013.
Any uptick in demand in this situation should benefit copper
miners and refiners.
Traders can gain exposure to a basket of copper miners via the
Global X Copper Miners ETF (
), which seeks to provide investment results that correspond
generally to the price and yield performance, before fees and
expenses, of the Solactive Global Copper Miners Index.
The fund invests at least 80% of assets in securities and
depositary receipts that comprise the index. The index is
designed to measure broad based equity market performance of
global companies involved in the copper mining industry. The fund
uses a replication strategy. It is non-diversified, with the top
10 holdings accounting for 53% of the portfolio and only 22
additional stocks making up the remainder.
Top holdings naturally include Freeport McMoRan (
) and Southern Copper (
) -- both weighted roughly 5% of the fund -- as well as various
copper miners that are difficult or impossible for U.S. traders
to invest in directly.
A quick look at the COPX daily chart reveals that price
bottomed on October 4, 2010 at $10.30.
More recently, price has moved sideways, bouncing of the 0.618
retracement twice -- a double bottom.
Price is currently attempting to break out at the upper end of
The fuel gauge continues to indicate strength, suggesting
traders may want to keep COPX on the radar screen in the event of
any break out of the sideways trading range.