The red metal has made a nice comback since May.
A few important things to consider:
- March represented the four-year low for the red metal, mostly due to slower expected growth from China. That low was set when China reported a surge in copper demand in April.
- A series of reports have highlighted growing costs for copper miners and a decided lack of new entrants, buoying the prices of entrenched miners like PanAust Ltd (PNA), which may be acquisition targets for larger integrated miners.
- Inventories at critical London Metals Exchange warehouses are at six year lows, leading to actual supply deficits in June.
All of this points to the classic case for a commodity rally: constrained supplies, increasing demand in a generally positive global economy. ETF investors have good reason to be cautious, however. While the iPath Dow Jones-UBS Copper Total Return ETN (JJC | B-77) has been highly tradable for years, the Global X Copper Miners ETF (COPX | D-99) can trade at wide spreads on thin volume, despite the recent rally in its underlying holdings.
