Steve Shafer, Chief Investment Officer for Covenant Financial Services, LLC (\u201cCovenant Investors\u201d), thinks copper may soon rival gold as the world\u2019s most sought-after metal because of its key role in China\u2019s unprecedented electrification efforts. Unlike gold, he adds, the copper rush will be driven purely by demand instead of fear, keeping prices high for years to come.<\/p>\n
\u201cCopper is the core of what I call a commodity \u2018supercycle\u2019 that will last until 2030 or longer, with coal, corn, crude oil, and natural gas part of the mix, \u201d commented Mr. Shafer, a global macro hedge fund manager. \u201cThat\u2019s because to grow China, you must first electrify China, and copper is the key to electrification at every point.\u00a0 Whether it is houses, hospitals, businesses, bullet trains, or cars, they all need power \u2013 which means they all need copper,\u201d he stated.<\/p>\n
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China experienced rolling power blackouts this summer because of a 1500 gigawatt power deficit (1 gigawatt = 1 billion watts) which, according to Mr. Shafer, equaled approximately the same amount of power used to electrify all of Argentina for a single year.\u00a0 To put China\u2019s power needs in perspective, Mr. Shafer said China has 160 cities with 1 million or more people, and intends to add urban centers for 300 million of its 1.2 billion population over the next 5 to 10 years. To do that, analysts says China will need to add twice the total amount of coal-fired utility power presently used in the whole country of Britain to meet its rising domestic power needs every year.<\/p>\n
Mr. Shafer\u2019s predictions come as the International Copper Study Group (ICSG) projects world copper demand in 2011 outstripping supply by 377,000 tons compared to a deficit of 250,000 tons in 2010, with China using 40% of the total world\u2019s supply.\u00a0 If this rate of consumption continues, more copper will be consumed in the next 27 years than has been consumed over the past 106 years.<\/p>\n
\u201cWhile copper prices have been depressed recently, and may go yet lower due to macroeconomic uncertainty, we feel certain that within three to five years, copper will be appreciably higher based upon real demand and not the financial alchemy that afflicts gold prices,\u201d commented Mr. Shafer.\u00a0 \u201cInvestors should use these dips to accumulate long term contracts at lower prices and not worry about the volatility in the short term.\u00a0 Real wealth isn\u2019t made on a tick-by-tick basis but by exploiting real investment opportunities like the supply\/demand imbalance presented by China\u2019s insatiable appetite for copper,\u201d he added.<\/p>\n
Mr. Shafer calculates that if worldwide demand for copper grows a conservative 3% annually over the next 10 years, an additional 44 new mines that produce at least 150,000 tons per year or more will have to be brought on line.\u00a0 Today, only 26 mines of this size are known to exist worldwide. In fact, China\u2019s copper consumption grew by 4.3% in 2010 and is slated to increase by 6% in 2011.<\/p>\n
\u201cSimply put, we want to own the things that China and its peers want,\u201d commented Mr. Shafer.<\/p>\n
His bullish scenario for China contrasts sharply with his pessimistic economic outlook for the U.S. and Europe. In Mr. Shafer\u2019s macro view, Western countries\u2019 high debt-to-GDP ratios will prolong slow or stagnant economic growth for years to come.<\/p>\n
<\/p>\n","protected":false},"excerpt":{"rendered":"
Steve Shafer, Chief Investment Officer for Covenant Financial Services, LLC (\u201cCovenant Investors\u201d), thinks copper may soon rival gold as the world\u2019s most sought-after metal because of its key role in China\u2019s unprecedented electrification efforts. Unlike gold, he adds, the copper […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[16022],"tags":[],"class_list":["post-24632","post","type-post","status-publish","format-standard","hentry","category-opinion"],"_links":{"self":[{"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/posts\/24632","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/comments?post=24632"}],"version-history":[{"count":2,"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/posts\/24632\/revisions"}],"predecessor-version":[{"id":24636,"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/posts\/24632\/revisions\/24636"}],"wp:attachment":[{"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/media?parent=24632"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/categories?post=24632"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/tags?post=24632"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}