Dr. Copper's Chinese Friends...

06/23/08 02:15PM EDT
Chinese industrial production numbers for May came in at a respectable +16%, but that is still down -210 basis points from last year's growth rate. Dampening Asian Industrial Production growth rates have explained most of copper's weakness in Q2.

However, as the facts change we do, and copper prices have done just that in the last week. We continue to hear that demand for building materials in Sichuan is starting to kick in, and that the process of rebuilding is only just beginning. This renewed Chinese demand story has provided a bullish narrative for copper prices.
  • Supply: More compelling supply data points come from the mining sector where there are some growing concerns that many of the major new copper projects that are supposed to come online internationally may not become operational on time.
  • Why? Credit constraints, rising transportation costs and, particularly in the case of Latin America, a deteriorating political situation.
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