copper long term report january, 2011

8/7/2019 Copper Long Term Report January, 2011

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COPPER ‐ THE RED GOLD

24th January, 2011

Metals and Energy Commentary24th January, 2011




Copper - The Gold in the basket of Industrial Metals

Copper is an industrial metal that is mainly used in building construction (electrical and plumbing). Copperis an excellent conductor of electricity and is resistant to corrosion. Expansion in manufacturing activities, jump in auto sales, increase in demand for houses, are some of the factors that lead to surge in demandfor the red metal.

Copper is often considered an accurate indicator of economic growth. An economic expansion is usuallypresent or beginning if demand for copper is increasing.

The largest producers of copper are Chile and Peru. The U.S. and China are the largest consumers of copper.

Recently, the Investment Demand for copper has heightened with prices of futures touching life timehighs. The demand for the metal has outpaced the supply. Market participants have become eagle-eyedand are viewing copper as an investment option. The prices of futures have jumped by almost 20% thisyear on London Metal Exchange (LME). The Exchange Traded Funds (ETF’s) are expected to be the majorparticipants in the futures market by this year, as some of the top companies and money managers plan tolaunch the ETF’s

Copper futures for three months delivery rose to a life time high on London Metal Exchange (LME) at $9447per tonne on 27th December 2010 on rising investment demand. The depleting supplies and improvementin the economic recovery is pushing up the demand as well as prices of the industrial metal. The overalldemand for copper in 2011 is expected to increase by 4.2% against an expected increase in production by2.6%, indicating demand will outpace the supply.

Let’s look at some interesting fundas that affect the price of Copper on a day to daybasis:

Strikes, shipping problems and political unrest in Chile, Peru and South Africa can cause adecrease in supplies of copper and cause copper futures to rally.

The price of copper futures is often tied to the rate of new homes being built and generalconstruction.

China has become a major user of copper and accounts for an increasing amount of demand forcopper. Any major move like interest rate hike or increase in margin requirements on theexchange pressurizes the red metal prices.

Economic Indicators, prominently from China, U.S and Euro Zone which indicate pick up in theeconomic activity and stability is supportive of the industrial metal prices.




The Eagle-eye view – Long term aspects that shall keep the pr ices up

Supply Demand Dynamics

Increasing demand for the Red metal

World Refined Copper Usage from 2000-2010 (2010 P rojected)

0

5,000

10,000

15,000

20,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

2010P

WORLD REFINED COPPER USAGE (000 metric tonnes)

Source: International Copper Study group (ICSG) and Indiabulls Research

World consumption of copper has seen an uptrend over the years. The table above

shows the projected consumption of copper in 2010. However, in its latest bulletin,the ICSG said that world demand outpaced supply in the Jan-Sep 2010 period thisyear.

International Copper Study Group (ICSG) in their latest bulletin released on 22nd December 2010 reported

that the refined Copper market balance was in production deficit of 80,000 tonnes in January to

September 2010. The world apparent usage grew by 8% in Jan-Sep 2010, compared to the corresponding

period previous year. China apparent usage was up by 4.5% during first 9 months.

According to another ICSG bulletin released on 23 rd Nov 2010, world copper market inthe year 2011, is expected to w itness deficit by 4, 00,000 tonnes.

The copper market for 2011 is expected to show a deficit of about 400,000 tonne, as increased economic

activity is expected to boost demand in copper end-use markets faster than the growth of refined

production. While industrial demand in 2011 is expected to increase significantly in all of the major

consuming regions, copper market off-take in the China-dominated Asian market, the leading global

refined copper market is expected to increase slightly.




Top Copper consuming countries in 1998 and 2009

As of 1998, major copperconsuming countries were USA

and Euro Zone with a conjointlyshare of around 50%. However,in the recent times of crisis whenthe economic growth came to a

pause the consumption alsodeclined.

Emerging economy like China,bought a lot of physical metal in2008 when the world was selling

it off, to quench its thirst of

infrastructure needs for the nextfew years


China is the largest consumerof the metal, being anemerging economy.

The emerging economiesaround the world, their risingliving standards and increasedinfrastructure projects require

industrial metals in bulk. Therapid rise of a middle class inemerging markets has led to

dramatic increases in demand.Unsurprisingly, much of thatstems from China, where as

much as 25% of thepopulation is now consideredmiddle class. And that figure

may double over the nextdecade.


Refined Copper Usage 1998

(13.5 Million Metric Tonnes)

Taiwan

4%

China

11%

USA

21%

Euro Zone

28%

Japan

9%

Korea

4%

Mexico

3%

India

2%

Others

18%

Refined Copper Usage 2009

(18 Million Metric Tonnes)

Taiwan3%

China

40%

USA9%Euro Zone

15%

Japan5%

Korea5%

Russia2%

India

3%

Others18%




World m ine production and refined production o f copper, 2000-2010 (2010 projected)

0

5000

10000

15000

20000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

2010P

WORLD MINE COPPER PRODUCTION

(000 metric tonnes)

Source: International Copper Study Group (ICSG) and Indiabulls Research

0

5,000

10,000

15,000

20,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

2010P

WORLD REFINED COPPER PRODUCTION

(000 metric tonnes)

Source: International Copper Study Group (ICSG) and Indiabulls Research

The world copper production has seen an increasing trend owing to growing demand. The metal is

recyclable, and does not loose its properties in the process. Even though it can be recycled and used, theproduction has increased over the years.

The share of USA in total production has declined over the years while that of Peru has increased to 7% in2009 from 4% in 1999. Countries like China, Russia, Indonesia and Australia have more or less samepercentage contribution in these years, but the consumption has gained tremendously in China.




Top Copper producing countries in 1999 and 2009

TOP PRODUCING COUNTRIES (1999)

Others

26%

Chile

28%

USA

17%

Canada

6%

Peru

4%China

4%

Indonesia

5%

Australia

5%

Russia

5%

Chile

USA Canada

Peru

China Indonesia

Australia

Russia

Others

Source- International Copper Study Group and World Metal Statistics

Since 1999-2009, Chile topped the world production by contributing a big percentage inthe overall production. Chile’s percentage contribution in total production has been

unchanged in the last decade. Being the major producer, strikes and political unrests havean immediate effect on the copper prices.

TOP PRODUCING COUNTRIES (2009)

Chile

27%

Peru

7%

USA

6%China

5%Indonesia

5%

Australia

5%

Russia

4%

Others

41%

Chile

Peru

USA China Indonesia

Australia

Russia

Others

Source- International Copper Study Group and World Metal Statistics

Chile is the top copper producing country with 53, 30,000 metric tonnes (27%) of total copperoutput in 2009. Peru follows with 12, 73,000 metric tonnes (7%) and USA produces 11, 90,000

metric tonnes (6%) of the total output (as of 2009)




U.S Production, Consumption and Economy

In the last decade, extraction of raw andprocessing into refined copper has visibly

declined. The recessionary phase in the U.S.has led to the consumption decline along with

production. The Industrial Metal copper isoften seen as an indicator of economic health

of the country.

Source: Copper Development Association andIndiabulls Research

The last three years from 2007-2009witnessed a decline in the domesticconsumption of total copper owing torecessionary phase in USA. The refinedcopper consumption has also declined from21% in 1999 to 9% in 2009 of the totalworld refined copper consumption.

Source: Copper Development Association and IndiabullsResearch

Some economic indicators of U.S. are signalingthat the economic scenario is expected to see thesullen sky disappear soon.

Also, the Federal Reserve Bank of U.S. hasplanned to purchase $600 billion worth of

bonds this year from June 2011 to spureconomic growth and consumption of themetal is expected to pick up again.

Source: Copper Development Association and Indiabulls Research

0

200

400

600

800

1000

1200

2001 2002 2003 2004 2005 2006 2007 2008 2009

Total Smelter Production in U.S.

(000ʹs Short tons )

0

500

1000

1500

2000

2001 2002 2003 2004 2005 2006 2007 2008 2009

Total Refined Production in U.S.

( 000ʹS Short tons )

0

500

1000

1500

2000

2500

3000

2001 2002 2003 2004 2005 2006 2007 2008 2009

Total Consumption in U.S.





U.S. Refined Copper Imports and Exports in short tons (907.18 kg), 2001-2009

0

200

400

600

800

1000

1200

1400

2001 2002 2003 2004 2005 2006 2007 2008 2009

Refined Copper Imports in U.S.

( 000ʹs Short tons )


0

20

40

60

80

100

120

140

2001 2002 2003 2004 2005 2006 2007 2008 2009

Refined Copper Exports in U.S.



In the last decade, copper consumption in the U.S declined by around 38% to 17, 99,000 short tons in2009 due to weak economic conditions. U.S imports of refined copper during the same period declined by47% owing to declining domestic consumption. While exports jumped from 26,000 shorts tons in 2001 to83,000 short tons in 2009 mainly to China, the largest consumer of the red metal.




U.S. Economic data that have a correlation w ith copper prices

Certain Economic data disseminating from the U.S. have a positive or negative correlation with copperprices on New York Mercantile Exchange (NYMEX) and London Metal Exchange (LME). These data impact the

prices of copper in a particular day as they are released. Market participants watch the data closely andreact to the news. Hence, the correlation indicates the movement of prices with the data.

Economic data(Period 2007-2010)

Correlationwith LME 3-

monthfutures

Manufactur ing and Sales

ISM Manufacturing PMI - It is an indicator of the economic health of the manufacturingsector. The PMI index is based on five major

indicators: new orders, inventory levels,production, supplier deliveries and theemployment environment.

0.50

Retail Sales – Total retail sales in the U.S.including auto mobile sales.

0.22

Business Sales- Total sales of manufacturers,wholesalers and retailers in U.S.

0.27

Philadelphia Fed Index – It is an indicator of economic health of the Manufacturing sector inthe Philadelphia region

-0.37

Infrastructure developments

Building Permits- Because receiving aBuilding Permit is the first step in theconstruction process, the figure is used as theearliest indicator for developments in thehousing market. Additionally, due to the highoutlays needed to begin construction projects,an increase in Building Permits implies anincrease in investment.

0.52

New Home sales- Sales of newly built singlefamily homes in United states.

0.31

Construction Spending- Total money spendon private and public infrastructure includingresidential and non residential expense.

0.02

Source: Indiabulls Research




A Ray of Hope – P ick up in U.S. Economy will spur the consumption of copper

Recent economic data disseminating from the U.S., is showing some signs of improvement in the economicrecovery. The consumers have been increasing their spending, though housing sector still seems to beweak. The manufacturing and retail sector have been showing a pick up in the activity which was very muchevident from the third quarter GDP growth of 2010 which came in at 2.6%. The Federal Reserve Bank hasannounced a $600 billion fund, to spur liquidity and spending in the economy. The fund shall start rollingfrom June 2011 by way of bond purchases in installments. The aim of the fund is to reduce unemploymentand bring the inflation to a level which is targeted by the Fed (1.7% - 2%). Hence, the attempt shall lead toa push to the wheels of economic recovery. With U.S. economies honking about its improving conditions wefurther expect the demand for the industrial metal to rise.

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1

2

3

4

5

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Q1‐

10

Q2‐

10

Q3‐

10

U.S. GDP Growth rate (%) 2000‐2010(Q3)

Source: - U.S. Bureau of Economic Analysis and Indiabulls Research

The GDP in the year 2009 dipped in the red territory, however, the year 2010 started with the positive noteand the U.S. GDP made a comeback. The spending on durables and other necessities has picked up thisyear, manifested by certain economic indicators. The economic indicators like ISM manufacturing, factoryorders, Purchasing Managers Index etc have been moving in the positive territory.

Fed Quantitative Easing to spur grow th in the U.S. Economy

The Federal Reserve has launched an all-out effort to shore up the U.S. economic recovery with a freshround quantitative easing and will buy $600bn of longer-term Treasury securities by June 2011. The Fed onNov 4, 2010 said it would buy $75bn of assets and will concentrate 46% of its buying on Treasuries withmaturities of 5-10 years, hoping to drive down some of the yields connected to borrowing costs forhouseholds and business. The Fed would adjust the programme as needed to best foster maximumemployment and price stability but it would employ its policy tools as necessary to support the economic

recovery and to help ensure that inflation, over time, is at levels consistent with its mandate.

The start of QE2 is one of the most significant decisions the Fed has made in years in an effort to boosteconomic growth and tackle the 9.4% U.S. unemployment rate recorded in December, 2010. While anychange to the $600 billion total depends on what happens in the coming months, Fed officials want to makesure that unemployment continues to decline and they want to see forecasts of inflation rising back towardstheir target of about 2% or a bit below.




Chinese trade in ores, alloys, unwrought and rolled copper from 1999-2008

0

100

200

300

400

500

600

700

800

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

China Copper Imports from 1999‐2008

(10,000 tons)

Copper Ores Copper Alloys Rolled Copper

Source: - National Bureau of Statistics of China and Indiabulls Research

0

20

40

60

80

100

19992000 2001 20022003 2004 2005 20062007 2008

China Copper Exports from 1999‐2008

(10,000 tons)

Unwrought Copper and alloys Rolled Copper

Source: - National Bureau of Statistics of China and Indiabulls Research

The hunger of the dragon country for refined copper has increased to 40% in 2009 from mere 11% in 1998.

The Chinese State Reserve Bureau stocked large amount of copper in 2008 when the entire world wasselling it off. With more and more people shifting from the rural area to the urban area, infrastructure anddevelopment needs is increasing tremendously. Moreover the demand from the Chinese real estate is everincreasing. Chinese copper imports have jumped from 243 (10,000 tons) in 1999 to 782 (10,000 tons) in2008, around 220% of surge.

China's urban fixed asset investment rose 24.4% in the first 10 months in 2010, year-on-year to hit 18.76trillion Yuan (2.83 trillion U.S. dollars). The urban investment in the primary, secondary and tertiaryindustries rose by 17.2 percent, 22.3 percent and 26.4 percent respectively. During the first 10 months,property development investment was up 36.5 percent year-on-year to reach 3.81 trillion Yuan. The evergrowing need for this industrial metal from China has kept the prices moving higher.




In an Inflationary Environment Copper prices tend to do well

Inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. That increases thevalue of the goods and services.

U.S. Inflation and LME copper futures

U.S. economy has been under

the threat of low inflation since

the mid of 2010. Inflation is

expected to pick up as the

Federal Reserve moved closer to

a second wave of monetary

easing and said for the first time

ion 4th Nov 2010, that too-low

inflation, in addition to sluggish

growth. The stimulus planned by

Fed is expected to boost the

inflation towards a target of

1.70% to 2.00%.

Source: - Indiabulls Research

The fed announced the stimulus plan in early Nov 2010 and later in Dec 2010 the inflation increased

marginally to 1.50% from 1.10% in Nov 2010. While U.K.’s inflation for Dec 2010 surged to 3.7% from

3.3% in Nov 2010 (annually): highest since 1996. The increase was above the Bank of England's own

forecasts and, for the 13th month in a row, eclipsed the ideal inflation target of 2%. A positive correlation of

0.88 was seen between U.S. inflation and prices of copper three months futures on London Metal Exchange

(LME) from the period 2001 to 2010. As, the Fed’s attempt to boost the economy will lead to higher inflationwe expect that move to be one of the multiple factors to underpin the copper prices.

U.K. Inflation and LME copper futuresThere is a talk around the worldto increase the interest rates totame the inflation. But unlesscentral banks of U.S. and EuroZone actually go forward andraise the rates from the currentlow level, having a higher levelof inflation will be extremelychallenging. Even if the interestrates go up, whether inflationwill come down is debatable asinflation around the world is asupply side problem. Hence, wefeel highly inflationaryenvironment around the worldwould continue to drive theprices of the red metal higher inthe coming months.


Correlation of U.K. Inflation (CPI) and copper futures on

LME (2001‐2010)

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2000

4000

6000

8000

10000

12000

LME three month copper futures U.K. Inflation (%)

Correlation of U.S. Inflation (CPI) and copper futures on

LME (2001‐2010)

175

185

195

205

215

225

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F e b ‐ 1 0

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2000

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10000

12000

LME three montth copper futures U.S. Inflation (CPI)




Events and statistics that impact copper pr ices in the shor t term

Just launched and lead the copper prices to touch new highs… ..

Exchange Traded Commodities (ETC’s)

The year end of 2010, witnessed the debut of Exchange Traded Products backed by physical copperindicating rising interest in investment demand.

Companies like JP Morgan, Blackrock Inc and U.K. based ETF were in talks to launch ETC’s backed byphysical copper. Out of these three companies, the U.K. based ETF securities launched the world's firstphysically backed industrial metal Exchange Traded Commodities (ETCs). These ETC’s started trading onLondon Stock Exchange (LSE) from 9th December 2010.Named as ETFS Physical Copper, the ETF is designed to offer investors a simple, transparent and secure wayto access the industrial metals market. It is intended to provide investors with a return equivalent tomovements in the London Metal Exchange Cash Settlement Copper Price less fees. Copper ETF’s are backedby physical metal stored at London Metal Exchange (LME) Warehouses, the ownership of which is evidenced

by LME Warrants (LME regulated warehouse receipts) or warehouse receipts held by the Issuer. All PhysicalMetal is held in LME approved warehouses and confirms to LME standards. Physically-backed copperexchange traded fund could draw in about 300,000 metric tons to 400,000 tons of the red metal, given thesuccess of the precious metals products. The rising need for physical copper appears like a pop up in theminds of investors, reminding them that demand shall outpace the supply, which will lead to further rise inprices. Since the launch of this ETF copper futures for three months delivery on LME has gained 5% from 9th December to 27th December 2010.

Impact on prices of commodities w hen their ETF’s are launched

It is very much evident from the past, that launch of ETF’s which are backed by physical metal leads tosurge in demand for that particular commodity. The iShares Silver Trust is a very good example for thesame, as after the launch of the fund, silver spot prices saw an uptrend.

iShares Silver Trust

iShares silver trust is thelargest ETF in the world,which is backed by silver.Originally established andlaunched by Barclay’s in May2006 now is owned byBlackrock. The companyacquired Barclays GlobalInvestors in December 2009under the BlackRock name,making it the largest moneymanager in the world. The

deal had been approved byBarclay’s shareholders andannounced on June 11,2009.


After the launch of the ETF in May 2006 silver prices gained 7.26% in a year. The holdings of silver in thetrust gained 75.6% by the year end of 2006. Every year the holdings have been increasing from 2,145.94tonnes in May 2006 to 10,921.57 tonnes in Dec 2010, indicating surge in the investment demand.

Silver Spot Prices and ETF holdings

0.0

5.0

10.0

15.0

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Silver Spot ($/troyounce) Holdings (in tonnes)




Major strikes in the past tw o years that lead the prices of copper to rise

Any political or Industrial unrest, in Chile or Peru affects the large copper mines situated thereand hence is supportive of the copper prices, as the unrest hinders production. Collahuasi mineowned by Anglo American plc and Xstrata plc recently faced a strike by the unions for almost amonth over a wage dispute. The 32-day long strike ended on 6th Dec 2010 led the copperfutures for three months delivery edge higher on London Metal Exchange (LME) to $8966 pertonne. The strike was the longest in private mining company in top producing country.

Country Mine Rank StrikeDate

Copper closingPrices on LME

($/ tonne)

Chile Collahuasi 3rd largest 29-Oct-10 29-Oct-10 8190

The strike lasted for 32 days and copper for threemonths delivery reached a high of $8966 on 11thNov 2010

1-Nov-10 8290

2-Nov-10 8411

Peru Collahuasi 3rd largest 7-May-10 7-May-10 6928.75

A strike by hundreds of subcontract workers atcopper mine, hurting operations at one of the worldslargest copper deposits.

10-May-10 7121

11-May-10 7036.5

Peru Doe Run 26-Feb-10 26-Feb-10 7226

Doe Run Peru’s copper miners began a strike to pushfor a bonus, as the company planned to reopen a

shuttered smelter.

1-Mar-10 7360

2-Mar-10 7500

Peru Chuquicamata 2nd largest 4-Jan-10 4-Jan-10 7506

The strike took place in Chuquicamata and Mina Surmines owned by Codelco, world's top copperproducing company

5-Jan-10 7525

6-Jan-10 7665

Chile Spence 13-Oct-09 13-Oct-09 6125

BHP Billion’s Spence copper mine lifted a 42-daystrike that generated output losses of 500 tonnes of copper per day. The strike ended on 23rd Nov 2010and over that period the prices gained 12.8% toclose at $6910 per tonne.

14-Oct-09 6252

15-Oct-09 6260




London Metal Exchange (LME)

The copper stockpiles monitored by LME have been declining persistently this year and in theyear end of 2010 were down by 37% since February 2010 when the stockpiles stood at555,075, the highest since Oct 2003.

Continuous fall in copper stockpiles on LME from early 2010 has lead to rise in pricesto historical levels and raised doubts for meeting demand in 2011

LME INVENTORY & COPPER PRICES (2005‐2010)

0

2000

4000

6000

8000

10000

12000

J a n ‐ 0 5

J u l ‐ 0

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J a n ‐ 1 0

J u l ‐ 1

0

0

100000

200000

300000

400000

500000

600000

Stocks (Tonnes) Prices ($/tonne)

Source: London Metal Exchange and Indiabulls Research

If you think Gold’s 30% gain last year is impressive, Copper even outshined the precious metal by rallying33% on the year, and reached an all-time record on London Metal Exchange, COMEX division of New YorkMercantile Exchange and a three and a half year high on Shanghai Futures Exchange. Copper futures forMarch delivery on the COMEX stood at $4.4470 a pound at year-end, a record settlement.

Copper Futures for three months delivery on London Metal Exchange (LME), share an inverse relationshipwith copper stockpiles on the bourse. Inventories, after declining from the mid year of 2008 startedshowing an uptrend since the start of January 2009 and in February 2009, the inventories on theexchange reached a five and a half year high of 5, 42,300 tonnes. Thereafter, stocks saw a decline untilthe mid of 2009 by around 50%, and prices gained 45.20% in a span of four months (Mar-Jun 2009) from$3423 per tonne in Feb 2009 to $4970 per tonne in Jun 2009.

In the year 2010, copper stockpiles once again reached six and a half year high in February 2010 at 5,49,725 tonnes and saw a more or less a declining trend throughout the year. By the year end the total

inventories declined by 30%, while prices gained 33% in the same period. Depleting inventories indicateincrease in consumption level. The increasing demand of the red gold day-by-day coupled with decliningstockpiles on LME leads to surge in its prices.




INVESTMENT in the Red Gold

Copper has already staged an impressive rally from the commodity wide sell-off

that occurred when the global financial crisis hit in 2008. While Western

economies were weak, copper demand remained strong in emerging economies

such as China, the world’s largest consumer of the metal. Whenever recovery

picks up in the West, demand should rise further.

On the fundamental side, the red base metal is seen as an economic barometer since it is mainly used in

building construction and electronics accounting for about 50% and 21% of the copper usage respectively

in the United States. Transportation equipment (11%), consumer and general products (10%), and

industrial machinery and equipment (8%) are the other major industrial usage sectors, according to the

U.S. Geological Survey.

The demand for the metal from developing countries will continue to increase owing to infrastructure and

development needs. China has a major share in driving the prices of the metal higher. The growing needs

of China will lead to higher demand for copper in coming years.

Investors are eyeing copper as an investment option as prices of copper has gained more than 50% from

2009-2010. With depleting stockpiles and increase in the demand for the red metal not only for

development purpose but also as an investment option with ETF’s coming into picture, the long term

outlook for copper as an investment option, looks bullish.




Copper Long-term Technical outlook

Copper 3Month Forward (London Metal Exchange) Long term Trend: BULLISH( Cu r r e n t p r i c e $ 9 , 6 0 0 / To n )

Copper LME 3Month Forward Contract – Monthly Chart


Copper LME 3Month Forward Contract – Weekly Chart





Technical Outlook: Copper in LME 3 Month Forward Contract continued its secondconsecutive year of bull rally which started from $3,055/tonne in Jan 2009 and muscled itsway to knockdown its previous multi year highs ($8,800/tonne and $8,940/tonne), currentlytrading at $9,600/tonne on LME 31st Dec, 2010. Any genuine correction, which is 10-12%,should see Copper Prices sliding towards the breakout levels ($8,940/tonne), which should beused as a buying opportunity for a p o t e n t i a l u ps i de t a r g e t o f $ 1 1 , 5 0 0 / t o n n e f o r t h e y e a r 2 0 1 1 a n d $ 1 5 , 0 0 0 / t o n n e a n d ca n a ls o ex t e n d t i l l $ 1 7 ,0 0 0 / t o n n e f o r 2 0 1 2 .

Patterns analysis:

A Multi Year Double top ($8,800/tonne, $ 8,940/tonne) is taken off very strongly givingway for a good bullish pattern for the coming year 2011.

Besides a Double top breakout, copper witnessed a Raising triangle breakout at$8,940/tonne on monthly charts, which should propel the prices towards $11,500/tonneand $15,000/tonne by the end of 2011 and 2012 respectively.

Copper seen moving in a Raising channel, with the momentum seen in the last 2 yearsand heading towards $10,000/tonne levels as immediate minor resistance at the top lineof the trend channel.

Oscillator’s analysis:

RSI, MACD and Momentum indicators are rising up and are in overbought condition, sincethere is no reversal candle pattern, momentum would continue till $10000 to test channel topline from where prices can correct till $9,000/tonne and $8,500/tonne levels to adjust theoverbought condition before rallying up in next traded months.

Risk Analysis:

A genuine correction is due for next year which could be around 10%-12% fromcurrent levels can see prices coming back to $9,000/tonne - $8,940/tonne breakout levels oreven channel bottom line $8,500/tonne, but a b r e ak o r c l o se b e l ow $ 8 , 0 0 0 / t o n n e l e v el s o n m o n t h l y b a si s w o u l d d i st u r b t h e c h a r t p a t t e r n s , m e an b u l l s m o m e n t u m w o u l d g e t f reeze.

Conclusion

Investment idea:Corporate / HNI / Long-term traders: Buy 25% @CMP $9,600/ tonne and remainingon decline at $9,000/ tonne and $8,500/ tonne for positional targets of $11,500/ tonne and $15,000/ tonne, w ith a stop below $8,000/ tonne on closingbasis. (Time Frame – 2 Y ears)

Investment idea:Retail clients/ Short term traders: Buy 50% @ CMP $9,600/ tonne and remaining ondecline at $9,400/ tonne for a short term targets of $10,000/ tonne, with a stopbelow $9,200/ tonne on closing basis. (Time Frame – 2 to 3 Months)




Copper (Multi Commodity Exchange – I ndia) Long term Trend: BULLISH(Current price Rs.437/Kg in MCX)

Copper MCX Continuous Monthly Chart


Copper MCX Continuous Weekly Chart





Technical Outlook: Copper continued its second consecutive year of bull rally which startedfrom Rs.150.85/Kg in MCX in Jan 2009 and muscled its way to knockdown its previous multiyear highs (Rs.397.85/Kg and 387.3/Kg in MCX) trading currently at Rs.434/Kg till last. Anygenuine correction, which is 10% - 12% should see copper sliding towards Rs.390/Kg levels,which should be used as a buying opportunity for a potential upside target of Rs.515/Kg andRs.635/Kg in MCX by the end of year 2011 and 2012 respectively.

Patterns analysis:

A Multi Year Double top (Rs.397.85/Kg, Rs.387.3/Kg) is taken off very strongly givingway for a good bullish pattern for the coming year 2011.

Besides a Double top breakout, copper witnessed a Raising triangle breakout atRs.390/Kg on monthly charts, which should propel the prices towards Rs.515/Kg by theend of Year 2011.

Copper seen moving in a Raising channel, with the momentum seen in the last 2 yearsand heading towards Rs.455/Kg levels as immediate minor resistance at the top line of thetrend channel.

Oscillator’s analysis:

RSI, MACD and Momentum indicators are rising up and are in overbought condition, sincethere is no reversal candle pattern, momentum would continue till Rs.455/Kg to test channeltop line from where prices can correct till Rs.410/Kg and Rs.390/Kg levels to adjust theoverbought condition before rallying up in next traded months.

Risk Analysis:

A genuine correction is due for next year which could be around 10% - 12% from currentlevels can see prices coming back to Rs. 410/Kg and even Rs.390/Kg which is channel bottomline Rs.390/Kg, but a break or c lose be low Rs.360/ Kg o n m o n t h l y b a s is w o u l d d i st u r b t h e c h a r t p a t t e r n s , m e a n s b u l l s m o m e n t u m w o u l d g e t f r e e ze .




Conclusion:

Investment idea:Corporate / HNI / Long-term traders: Buy 25% @ Rs.437/ Kg and remaining ondecline at Rs.410/ Kg and Rs.390/ Kg for a positional targets of Rs.515/ Kg andRs.635/Kg, with a stop below Rs.360/ Kg on closing basis. (Time Frame – 2 Years)

Investment idea:

Retail clients/ Short term traders: Buy 50%@ CMP Rs.437/ Kg and remaining ondecline at Rs.428/ Kg for a short term targets of Rs.455/ Kg and Rs.470/ Kg, with astop below Rs.419 /Kg on closing basis. (Time Frame – 2 to 3 Months)

For Trade Enquiries Contact us at:- +91 22 39805504 or email us at [email protected]

Indiabulls Commodities Limited Indiabulls Finance Centre, Tower-1, F.P. No 612, 613 of T.P.S., Mahim Division, 8 th Floor

Elphinstone Mills, Senapati Bapat Marg, Mumbai 400 013

Research Team

Ravi Prak ash Dako j i ,

Sr. Research Analyst (+91-022-39805127)

Reem a Ta l re ja ,

Research Analyst (+91-022-39805379)



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This material is for the general information of the authorized recipient, and we are not soliciting any action based

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Past performance is not a guide for future performance. The value of, and income from investments may varybecause of changes in the macro and micro economic conditions. Past performance is not necessarily a guide tofuture performance.

This report is based upon information that we consider reliable, but we do not represent that it is accurate orcomplete, and it should not be relied upon as such. Any opinions expressed here in reflect judgments at this dateand are subject to change without notice. Indiabulls Commodities Limited and any/all of its group companies ordirectors or employees reserves its right to suspend the publication of this Report and are not under any obligationto tell you when opinions or information in this report change. In addition, Indiabulls Commodities Limited has noobligation to continue to publish reports on all the commodities currently under its coverage or to notify you in theevent it terminates its coverage. Neither Indiabulls Commodities Limited nor any of its affiliates, associates,directors or employees shall in any way be responsible for any loss or damage that may arise to any person fromany error in the information contained in this report.

The analyst for this report certifies that all of the views expressed in this report accurately reflect his or herpersonal views about the subject commodity and no part of his or her compensation was, is or will be, directly orindirectly related to specific recommendations or views expressed in this report. No part of this material may beduplicated in any form and/or redistributed without Indiabulls Commodities Limited prior written consent.

The information given herein should be treated as only factor, while making investment decision. The report doesnot provide individually tailor-made investment advice. Indiabulls Commodities Limited recommends that investorsindependently evaluate particular investments and strategies, and encourages investors to seek the advice of afinancial adviser. Indiabulls Commodities Limited shall not be responsible for any transaction conducted based onthe information given in this report, which is in violation of rules and regulations of Multi Commodity Exchange of

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copper long term report january, 2011

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