Shortage of copper supply is coming

While the Chinese markets are struggling, believe or not the Chinese economy is showing signs of recovering. Per Bloomberg report, copper supply shortages will extend into the first half of next year as an accelerating Chinese economy more than doubles the pace of growth in global consumption even as mines extract a record amount of metal. Given 41% of the world's copper is consumed by China, it will mean more demand should be expected. The problem is that demand will outpace supply by 316,000 metric tons in the first six months, more than all copper in London Metal Exchange warehouses, before a surplus emerges in the second half. Production has lagged behind consumption since 2010, according to the International Copper Study Group. The metal may average $8,300 a ton in the second quarter, 5.1 percent more than now and the most in a year, according to the median of 21 analyst and trader estimates compiled by Bloomberg. More stimulus has been announced or planned in the US, Europe & Japan will further deepen the supply shortage.

So how to ride this uptrend?  You may consider Freeport-McMoRan Copper & Gold Inc. (FCX), the biggest copper producer. It is expected a 44 percent gain in net income next year. It is also estimated that its share price may jump by 30% next year. You may also consider Vale S.A. (VALE), which is the largest producer of basic metals in Brazil and a significant portion of its metals is copper. Its price action appears to be bottoming. The shortage of supply of copper may fire VALE's stock price.