<This would mean that farther out contracts might be a good trade.>
Yes, that's how I've traded copper for two years now, and you pick up the backwardization (the correct term as opposed to contango) every time. Made more on backwardization trades than price spikes really.
Illustrates how extreme backwardization is, and it's like this all the time.
futuresource.com
What's bizarre about this is that I'm not aware of any new mines or supply coming on line in the next year. In fact there's some steady depletion going on in key mines.
energybulletin.net
For example, Turquoise Hill - a large resource estimated at 19 million tons - won't be put into production until 2007 at the earliest, and, depending on the size and production plan, only after an expense of up to $2 billion.
Cutting to the chase, in order for the copper industry to off-set the fast approaching supply/demand shortfall, it will have to do much, much better - in fact, it will require a new mega-mine on the order of Turquoise Hill to come on line each and every year for the foreseeable future.
Yet, looking over the horizon, there is only one large copper mine, Sossego in Brazil, slated to come on stream in the foreseeable future, later this year, or early next.
Bottom line: the odds of the mining industry being able to find and bring on enough new mine supply to head off the coming copper crunch - in the short, medium or even long-term - is slim to none, and slim is being body-searched at the airport on the way out of town. |
