Copper has a PhD in economics

Some say Copper has a PhD in economics. Because Copper is used in everything from electrical wiring to water pipes, it is seen as a good measure of the economy. If demand for Copper falls, then it’s believed the economy is slowing.

On Tuesday, Treasurer Peter Costello had spruiked the government’s economic credentials, telling Australian’s they had nothing to fear from the US subprime mortgage crisis because we have one of the smallest default rates in the world. This argument was soon countered by the CEO of Australia’s largest debt collector who indicated there was no accurate data on Mortgage Defaults and many sales had the consent of home owners, meaning they were not actually recorded as defaults. More on this, here.

Today, it was Prime Minister Howard’s turn to spruik the government’s economic credentials on Macquarie Regional radio, saying the resource boom will last for years. “First of all the resources boom is likely to go on for years. I can’t say how many,” suggested the PM. “The Chinese economy is going to go on expanding for many years. It has still got an enormous amount of surplus expansion capacity.”

Meanwhile this week, Copper has fallen over 8%, the largest weekly drop for four months. “It’s realistic to expect a slowdown” in Chinese metal consumption, Jim Lennon, an analyst at Macquarie Bank Ltd. in London, said today in a telephone interview. “There is no way that this rate of growth can be maintained.”

Chinese import figures for April showed copper imports fell 1% to 304,672 metric tons from a record 307,740 tons in March. Yesterday, we saw housing completions across the world’s largest economy, the USA down 26% from the same time last year.

The Australasian Investment Review writes “Analysts are now forecasting China might need up to 20 per cent less copper in the second half of 2007, meaning stocks will rise sharply, just at a time when production is finally cranking out more metal from mines like Escondida (owned by BHP Billiton and Rio Tinto).”

» Resources will boom for years – Howard – The Australian, 18th May 2007.
» Copper, Gold Turning? – Yahoo Finance, 18th May 2007.
» Copper market’s topping action confirms recession – stocks can drop abruptly – India Daily, 15th May 2007.
» Copper Heads for Largest Weekly Drop in Four Months; Zinc Falls – Bloomberg, 18th May 2007.