Same pattern as in previous silver manipulations, apparently SOP for the commodity markets.
The large-scale intrusion of the financial sector, with the apparent support of most large producers, creating a structure that makes the copper market seem tight and thus able to push prices continuously higher, is destroying the very foundations of the industry. Demand destruction is widespread and will deepen even more as manufacturers throw funds at R&D to design copper out of their products, a subject we have explored at some depth for some time.
The real question is how long can this new structure last. The answer really is until the second global credit crisis hits the world. This will probably begin later this year and explode in 2012 to be followed by a return to global recession and deflation.
Copper prices will be conditioned by these developments. Peak prices for 2011 will be experienced in the first quarter of the year, if they have not already been seen. Prices will then fall until around the start of the fourth quarter, hitting a low of some $5500. Recovery will follow rising parabolically in 2012 to some $14,000 by the end of next year.
This will signal the end of the gaming of copper prices. A return to global recession, deflation and the destruction of large end uses of copper will see prices crashing to levels long since forgotten – to under $1500 by 2016. It will be at that point that the real restructuring of the industry will take place. Future trend growth rates for world refined copper consumption will be below 2% a year implying that marginal producers will be closed down. It is not a shortage of supply that will shape the future of copper but a shortage of required material for furnaces.
Today?s focus on short-term copper prices has sown the seeds for its own destruction. History does not always repeat itself but it frequently rhymes. As in the mid-1980s, material warehoused outside the reporting system will be thrown onto markets as investors/speculators will demand cash against their investments.