World copper consumption supply and demand in 2011

How much copper does the world consume each year? And where can we expect prices to go in 2011?

Worldwide copper consumption

After a shortfall of some 436,000 tons of copper last year, investors are bullish on the red metal in 2011. But just how much copper does the world consume? The short answer is roughly 20 million tons a year according to the World Bureau of Metal Statistics.

Global demand for copper grew by 8 percent during the first nine months of 2010 (per Reuters), and that’s got some investors calling for copper to rise above $11,000 per ton this year.

Estimates for global copper shortfalls in the coming years range from 380,000 tons to 500,000 tonnes in 2011 and Standard Bank predicts a deficit of 562,000 tonnes in 2012, according to

Investor demand from physical copper ETFs could add even more pressure to an already strained market. That’s good news for investors and miners, but it could also drive up commodity prices in the midst of a fragile economic recovery.

Still, the ingredients seem ripe for a bubble in copper prices. There’s growing demand, looming inflation, a projected shortfall in supply and the emergence of physical copper ETFs. It’ll be interesting to see if those factors have the red metal shining brighter than its flashier cousins this year.


How to invest in palladium

Palladium ETFs are a newcomer on U.S. stock exchanges, and they could help drive up investor demand for palladium.

Since it doesn’t end up in the news very often, individual investors rarely look to palladium as an investment option in the precious metals field. That could change in the coming year as 2010’s return on palladium (+83 percent YTD) has out-paced gold (+24 percent), silver (+71 percent) and platinum (+16 percent YTD).

Why the spike in palladium?

Of the big four precious metals (gold, silver, platinum and palladium), platinum and palladium are closely tied to economic development. Since both metals are used extensively in the production of catalytic converters for automobiles, they do well when economies are expanding (think China and India). Palladium could also see increased investor demand thanks to new ETFs and plans by the U.S. Mint to start producing American Eagle palladium bullion coins.

How can I invest in palladium?

There are a handful of ways to legitimately (and fairly safely) invest in palladium:

  • Buy palladium bullion coins
  • Buy stock in a palladium ETF (exchange-traded fund)
  • Buy stock in a palladium mining or palladium recycling company

Where can I find palladium bullion coins?

U.S. President Barack Obama signed a bill into law on Dec. 14, 2010, that would “authorize the production of palladium bullion coins” by the U.S. Mint. No word yet on when the palladium bullion coins will hit the market. Expect them to be a hot commodity, though, if for nothing else than owing to their scarcity.

After being discontinued in 1999, the Canadian Mint started producing its Palladium Maple Leaf one-ounce palladium bullion coin again in 2005. Individuals cannot purchase coins directly from the mint, but Canadian palladium bullion coins are available through coin dealers and occasionally on auction sites like eBay. Still, they’re difficult to find.

Other palladium bullion bars and coins from countries like Switzerland, China, Russia and France are available on various web sites and via coin dealers. Make sure you FULLY understand what you’re buying before you try to acquire these coins or bars.

Palladium ETFs

Palladium ETFs are a newcomer on U.S. stock exchanges. There are currently two palladium ETFs on the NYSE that I’m aware of:

  • ETFS Physical Palladium Shares (NYSE:PALL): A palladium ETF that looks to match movements in the palladium spot price minus fees
  • ETFS White Metals Basket Trust (NYSE:WITE): A physical silver, platinum and palladium ETF that started trading on Dec. 3, 2010

Finding the best palladium stocks

Palladium mining stocks operate in a small niche. Most of the world’s palladium deposits are concentrated in just four countries: Russia, which produces 44+ percent of the world’s palladium, South Africa, which produces 40 percent, Canada, which produces 6 percent and the U.S., which produces 5 percent.

The biggest deposit in the U.S. is concentrated in the Stillwater igneous complex in Montana (incidentally the home state of Rep. Dennis Rehberg who introduced the American Eagle Palladium Bullion Coin Act of 2010). Stillwater Mining Company (NYSE:SWC) is an obvious candidate for buying a palladium stock. Stillwater’s shares are up 116 percent YTD.

Here are some palladium stock suggestions for further research as we move into 2011:

  • North American Palladium Ltd. (AMEX:PAL), +89 percent YTD
  • Noril’skiy nikel’ GMK OAO (PINK:NILSY), +64 percent YTD
  • Anooraq Resources Corporation (AMEX:ANO), +66 percent YTD


Palladium Image Source:

Uranium Resources, Inc. (URRE): The most explosive small-cap uranium stock on the market?

Shares in Uranium Resources, Inc. (URRE) are up 353 percent year to date with most of those concentrated over the past three months. Early in September, shares of URRE were trading at $0.72. Now, they’re at $3.49, a gain of 383 percent in three months. What gives?

With the rise in commodity prices, everyone seems focused on silver, copper and coal, but the biggest success story seems to be in the small-cap uranium stocks. Their performance – and, in particular, the performance of Uranium Resources, Inc. (NASDAQ:URRE) is staggering.

Consider the numbers: year-to-date, shares in URRE are up 353 percent. Those gains though have been concentrated over the past three months. Early in September, shares of URRE were trading at $0.72. Now, they’re at $3.49 – a gain of 383 percent in three months!

This is all even more incredible considering the fact that the company announced and executed the sale of more than 8 million new shares in November. What gives? Like most commodity stocks, we can ultimately point the finger at China. The country’s growing energy demands mean they’ve got to get their hands on just about every way to produce electricity they can, from hydroelectric power to coal to solar, wind, oil and, indeed, nuclear power.

[Disclaimer: I currently hold shares in URRE]

Couple China’s surging demand for uranium with URRE’s partnership with Cameco Resources, a subsidiary of Cameco (NYSE: CCJ), and you’ve got a small-cap success story that could just be warming up.

“The impact of increased demand on the market has coincided with downgrades to production guidance at ASX-listed Energy Resources of Australia’s (ERA’s) Ranger uranium mine, in the Northern Territory, among other producers,” RCR MD John Wilson told Mining Weekly.

As demand grows in China, producers from around the world are expecting to mine less uranium. It’s supply and demand at its best (or worst, depending on your perspective). What we do know, though, is that even if China’s economy slows, it’ll still consume more electricity, and that electricity has got to come from somewhere. Hopefully, URRE and Cameco will be two of the country’s many suppliers moving forward.


How to stomach volatility in gold and silver markets

It doesn’t matter what gold and silver prices do in the short-run. It’s the end result (inflation) that everyone knows is coming that’s important.

One of the trickiest parts of investing is refusing to get caught up in the day-to-day whims and volatility of the markets. I learned this the hard way in 2008. I was just getting started in stocks, and I thought banks were getting unfairly punished by the markets. I bought at precisely the wrong time, and watched some 60 percent or more of my portfolio evaporate. I was eventually forced out of my positions courtesy of a margin call. If I hadn’t been trading on margin, I would have been in the green by now, but alas, I didn’t have enough of a cushion to absorb the panic that struck the markets just a few short years ago.

It was a valuable lesson, and it’s one that I keep thinking about as I watch the volatility in the gold and silver markets. Over the past 30 days, writes analyst James West, the price of gold has swung between $1,340 and ounce, and $1,420 an ounce, giving it a volatility ratio of 5.6%. Silver, in the same period traded between $25.38 and 30.50, which gives it a 16% volatility ratio. Oil’s volatility range over thirty days lies between $80.28 and $90.87, or 11.65%.

Unlucky timing in your silver investment means you could be down double-digits on your precious metals investment in just four short weeks. That’s not a good feeling. During such times, though, it’s particularly important that you look at why exactly you’re investing in gold and silver in the first place.

For me, it’s not so much certainty that the price of metals is going to keep rising; it’s rather a certainty that the value of the dollar is going to keep falling. QEII is nothing more than a fancy name for borrowing cash. The U.S. government is pulling out its debit card in an attempt to spur banks into lending, small businesses into hiring and big fish investors into scrambling out of bonds and into riskier, more lucrative investments such as stocks.

When money’s cheap, it makes no sense to leave it stashed in a money-market account. Even my “high-yield” Virtual Wallet savings account with PNC is pulling in just 1 percent a year. That’s pitiful compared to the nearly 20 percent returns I could get from a well-picked REIT. We’re in an environment where borrowing pays, and that’s precisely the sort of environment that breeds bubbles. And the writing on the wall says that the bubble is going to be in commodities. Demand for things like gold, silver, copper, coal, oil and natural gas – even wheat, cotton and sugar – is going to keep rising, even as the value of the dollar and other currencies falls. That will push up commodity prices over time.

It doesn’t matter what prices do in the short-run. It’s the end result that everyone knows is coming that’s important. Keep that in mind while your silver stocks bounce around like a buoy in a storm, and you’ll be a lot better off than you would if you keep checking the charts every 20 minutes. I learned that the hard way, and I expect a lot of people are doing the same thing right now. Don’t be one of them, and you stand to come out ahead of the inflation that’s just starting to peek over the horizon.


Physical copper ETFs could push prices over $10,000 per ton

The iPath Copper ETN (NYSE:JJC) already offers exposure to copper in the form of futures contracts, but physical copper ETFs could play a larger role in copper prices around the world.

Physical copper ETFs could be coming soon

If you’ve been reading this blog for any amount of time, you’d know I’m bullish on commodities – especially the ones that aren’t quite as sexy as gold and silver. Commodities like coal, copper and oil are so integral to expanding economies that countries like China are limiting domestic exports and gobbling up supplies to build stockpiles around the world.

Construction requires copper, and even the idea of physical copper ETFs has created something of a microstorm in the metals markets. JPMorgan and BlackRock iShares have started moving forward with their own individual proposals to launch ETFs that would store and warehouse physical copper.

The more money the copper funds control, the more copper the funds would be stuffing in their warehouses. Obviously, that would take copper off the market that could otherwise be used for meaningful construction projects.

“That physical ETF working and being successful – that’s the difference between $8,500 copper and $10,000 copper,” Max Layton, a metals analyst at Macquarie, tells Jack Farchy of the Financial Times.

If the funds grow large enough, investors could see a case of the tail wagging the dog. Would it be the fund driving up copper prices, or rising copper prices driving investors to dump more money into the ETF? It’s a line that hasn’t fully been tested.

There is one copper ETN that already offers exposure to copper in the form of futures contracts. The iPath Dow Jones-UBS Copper Subindex Total Return ETN (NYSE:JJC), though, has a relatively small market cap at $173 million. Still, it’s up 16 percent over the past three months, and if JPMorgan and BlackRock iShares are successful in their bids to create physical copper ETFs, I can see JJC – and the price of copper – continuing its upward climb.