“Copper prices, having suffered, will remain sluggish through the end of 2012, but the 2013 global economy will look better; prices should rise then.”
That was essentially the overarching outlook from the copper market panel at the Institute for Scrap Recycling Industries (ISRI) Commodities Roundtable 2012, which we had the opportunity to attend here in Chicago early this week.
Thing is, I feel like we’ve been hearing this line for a while, and from a number of sources.
Is that a bad thing? No, not necessarily. Will it hold true? That all depends on a number of factors. The key is that it will take time – in some cases, a lot of time – for those factors to play out.
The major factors affecting the copper and scrap markets can be distilled to three biggies: US economic rebound and political landscape, China’s commodity demand and current economic slowdown, and the EU sovereign debt crisis.
Jason Schenker, an energetic, fast-talking and confident market analyst/forecaster for Prestige Economics based in Austin, Texas — who, he would like everyone to know, has been ranked by Bloomberg as one of the very top forecasters of a range of global commodity prices (heck, he even has his own Bloomberg TV show) — also sees the global market and copper prices improving in 2013.
Prestige Economics forecasts global, EU, US and China GDP in real terms to either grow or stay the same in 2013. To us, their anticipated 0.5 percent rise in the Eurozone’s GDP seems perhaps a bit bullish, but the others toe the same line — China will still grow but not as fast, and US growth will remain static.
On the China demand question, see my colleague Stuart’s commentary for the lowdown.
Speaking of Europeans…
Schenker has a lot of European business — he consults for the European Central Bank, for example — so he appeared concerned about the EU’s unresolved debt issues. He does, however, predict the euro is here to stay and that distressed countries will be forced to accept austerity measures to move on.
“The euro is the Eurozone’s ugly baby — they have to love it, and they can’t take it back,” Schenker said. “But I don’t think the ugly baby is ugly for long.”
However, he had some choice words for the United States and its situation, economically and politically, as well.
“We have the really ugly baby, the US dollar — we have some debt problems,” Schenker noted, employing one of the understatements of the century.
With national debt at 100% of GDP, around $15.1 trillion, and programs such as Medicare looking completely insolvent, any longer-term US recovery seems threatened to say the least.
Which brings us to the impending US election, and the uncertainty comes with it.
“If anyone has seen ‘Alien v Predator,’ the tagline of the movie is ‘No matter who wins, we lose.’ That is the case with next election,” Schenker said.
According to Schenker, taxes are going up regardless, and Obamacare will mostly be here to stay; but equity markets will take a dip if Obama wins, and there will be more regulations for the scrap recycling industry and oil and gas.