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"It's a funny world because before 2003, companies produced more than they said they would," he elaborates. "It used to be that at this time of year in the 1990s, 1980s, 1970s, 1960s, head office would look at your production figures and if you had a strike or some other event that had affected your production they'd tell you that you were running behind budget and that they wanted you to mine the high grade. But today most of them will say that there isn't any high grade left that we aren't mining already. My theory is that there is no high-grade stuff left anywhere."
Goldie also points to the importance of the copper scrap market as a true indicator of supply and demand fundamentals and claims that scrap copper is in increasingly short supply. He cites figures published by American Metals Market demonstrating that in early 2011, the price of U.S. Refiner's #2 copper scrap was trading at a US$0.75 per lb. discount to the price of virgin copper on the London Metal Exchange. Today, by contrast, that spread has narrowed to US$0.16 per lb. "That's the single-best indicator that there is not a surplus of copper but a shortage of copper," he says. "And if the price of copper goes up, it doesn't necessarily reflect an increase in demand, it can be just someone playing financial games. But you can't do that with the scrap metal exchange."
Finally he argues that China's copper imports have been growing. According to figures from CIBC published Sept. 10, China imported 388,000 tonnes of copper and related products in August, down 6% from the previous month, but “firmly above the average monthly import levels of 350,000 tonnes over the past two years.”
- See more at: northernminer.com
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