On Monday there was an article in the WSJ entitled Copper Vets Make Bet with Start-up Firm. The article discussed the launch of a new mining company that is going to search for overlooked deposits of copper and possibly other materials.
The article shared some 2009 information regarding the copper wire, which got us thinking about Southwire’s acquisition of AIW.
Some data from the article:
- Copper’s 2009 demand was propped up by China’s demand. China accounts for 40% of the world’s demand (and you wondered why copper prices didn’t decline during a recession!) China’s purchases increased 43% in the first 10 months of 2009 whereas the rest of the world (60% of demand) declined by 18% (according to the International Copper Study Group)
- Mine production rose 2%
- Copper inventories in London and Shanghai are up
And here is the kicker … with economic recoveries expected throughout the world, Barclays Capital is projecting that the average price of copper will rise 34% this year from 2009’s average price (and it is currently down 18% from July 2008, which means the average price will be over $4.50!)
Now we’re not saying we agree with the projected average price, but could AIW have been a very good deal for Southwire? Could they be expecting the price of copper to increase, especially with demand expected to increase, resulting in a rich payoff?
What do you think the future holds for copper? How will Southwire’s acquisition of AIW impact you? Your ability to “shop” wire?
3 Comments
world recesion
no credit for small to midsize companies
housing continues to sit idle
comercial real estate is starting to crumble
unemployment is still climbing
business outlook for new non government spending
is non existent
i will bet that copper will return to it’s
historical price of around $1- $1.25 a pound
before the year’s end.
good luck in your gamble’s
The Artice looks factual. At the same time the business climate and sentiments are still not great. So My bet is the Copper / Metal prices will only stay at 2009 levels or will only come down.
Think of copper globally and outside of the domestic electrical construction industry: think transmission and distribution; motors for electric vehicles, solar and wind connection, power plants in China, etc. Other commodity metals follow. I placed a bet with Vanguard’s precious metals fund thinking out another few years beyond the construction recession (depression) in the U.S.
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