Bach Seat

Copper prices are on the upswing again and could be taking the cost of low voltage cabling with it. According to an article from MarketWatch. Copper (Cu)  finished 2008 at about half the price it started with, but lately, it’s been rising thanks to China’s 4 trillion yuan ($585 billion) stimulus plan. The Chinese stimulus plans are expected to kick in later this year and through to 2010 in “massive infrastructure projects,” according to Martin Hayes, an analyst at BaseMetals.com. Those projects “will use significant tonnage of base metals, including copper.”

Copper’s “often called ‘Doctor Copper’ because it takes the temperature of the global economy,” said Sean Brodrick, a natural-resources analyst at UncommonWisdomDaily.com. “According to Doctor Copper, things are improving, mainly due to Chinese demand.” Already, China’s imports of copper and alloys climbed 55% in February from January, said, Brodrick.

On 02-27-2009, copper prices climbed to a four-month high of nearly $1.90 per pound on the Comex division of the New York Mercantile Exchange.

Brent Cook, the author of the investment letter Exploration Insights, argued that the recent gains in copper prices may not be fundamental demand driven by consumption. “The global building and construction market is not improving,” he said. “If anything, [it] is still getting worse — ditto automobiles.” Cook goes on, “I believe we are seeing a combination of a bear market rally, short-covering rally, and restocking by the Chinese who have a real incentive to turn their U.S. dollar into hard assets.”

RB –

It was not that long ago that China’s rush up to the Beijing Olympics drove commodities such as steel, concrete, and copper way up. As I pointed out the last time Cu took off, it impacts the cost of telecommunications cables and the cost of new projects. I believe that Exploration Insights Cook is right that this current run-up is part of the Chinese effort to convert the one trillion of US debt they own to something else.

China’s premier, Wen Jiabao, recently expressed concern about the safety of China’s $1 trillion investment in American government debt, the world’s largest such holding, and urged the Obama administration to give assurances that its investment would keep its value in the face of a global financial crisis. “We have lent a huge amount of money to the U.S. Of course we are concerned about the safety of our assets,” Wen told reporters. “To be honest, I am definitely a little worried.” (www.uncommonwisdomdaily.com/)

At least this run-up is not accompanied by a surge in oil prices like in 2007. For all of our sake’s let us hope that Cu is a leading indicator of a growing economy.

Ralph Bach has been in IT long enough to know better and has blogged from his Bach Seat about IT, careers, and anything else that catches his attention since 2005. You can follow him on LinkedIn, Facebook, and Twitter. Email the Bach Seat here.