Caterpillar Inc. Shorted By Hedge Fund, So Where Is Copper Going?

Once again, it seems the fortunes of Caterpillar Inc. (CAT) and the copper market are intertwined.

Big hedge fund guy Jim Chanos made news when he announced he was short-selling Caterpillar stock, based on the commodity supercycle being over. Just consider this fun little ramble, cited in Barron’s:

“If you consider that one company in the Dow Jones has 30% of its revenue tied to global mining capex, and 50% of its operating profit tied to global mining capex, and that global mining capex grew 8% per year from 1990 to 2001, the first up leg in global commodity super cycle, and then in the last four years grew at a 24% annual clip, and that one third of global mining capex is equipment, that lands you at the door step of Caterpiller…it is in the wrong products at the wrong time in the cycle.”

What’s the Copper Price Forecast?
In its latest round of price forecasts, Barclays sees the potential downside for copper prices being bigger than for any other metal, reports Reuters.

One of the main issues causing copper price volatility is the sharp slowdown in Chinese economic growth, the bank said. ”We are in the middle of a cycle of stronger copper mine supply driven by a combination of new projects, increased recoveries at established facilities, and expansions,” Barclays was quoted as saying by Reuters.

The price of Chinese copper bar fell 1.5 percent on Thursday, July 18, making it the day’s biggest mover.

After improving for two days, the cash price of Chinese copper declined 1.5 percent. The price of Chinese copper wire fell 1.2 percent. The price of Chinese bright copper scrap held steady.

The price of US copper producer grade 110 and 122 declined 1.3 percent. The price of US copper producer grade 102 fell 1.2 percent. The Japanese copper cash price gained 0.6 percent.

The copper 3-month price saw a 0.4 percent decline on the LME to $6,939 per metric ton. Also on the LME, the primary copper cash price declined 0.2 percent to $6,923 per metric ton.