26th International Copper Conference Madrid Christoph Eibl Chief Executive March 2013
Preferences Copper form a Fund Manager s point of view As a strategic investor (i.e. long only) fundamentals rule Deficit and expected deficit Inverted yield, i.e. backwardation Low stock/inventory (LME/non-LME) SHFE/LME arbitrage and stock positioning As a tactical investor sentiment, technical indicators and momentum rule Trend following concepts Algorithmic strategies Investors love backwardation, physical players contango Current forward curve neither attracts nor frightens investors Backwardation incentive for roll yields Copper competes with other base metals/commodities/asset classes 2
Metals & Equities Industrial Metals and equity markets seem to be trading 2 different worlds 40% 3
Industrial Metals From a market balance perspective, tin and copper have the best fundamental outlook 10% Market balance for industrial metals (as % of total annual demand) 8% Surplus 6% 4% 2% 0% -2% -4% -6% 2009 2010 2011 2012 (f'cast) Deficit Zinc Nickel Aluminium Lead Copper Tin 4
Correlation Correlation of Copper with Equities, USD and Sub-Indices 120% 100% 80% 60% 40% 20% 0% -20% SPX USD DJUBS Energy DJUBS Metals DJUBS Precious DJUBS Agricultures Correlation to USD is moving towards 0% -40% -60% -80% -100% Copper vs. SPX USD DJUBS Energy DJUBS Metals DJUBS Precious DJUBS Agricultures Correlation 40,8% -12,9% 6,5% 91,3% 52,4% 10,1% 5
Correlation Correlation of Copper with Base Metals and Gold 90% 80% Aluminium Nickel 70% Lead 60% 50% Zinc Tin Gold Correlation with Gold is moving up since new year 40% 30% Jun.2012 Jul.2012 Aug.2012 Sep.2012 Okt.2012 Nov.2012 Dez.2012 Jan.2013 Copper vs. Aluminium Nickel Lead Zinc Tin Gold Correlation 80,1% 57,1% 64,6% 73,7% 55,4% 49,3% 6
Sector Performance Copper Aluminium Ratio 4,5 4,0 3,5 3,0 2,5 Copper / Aluminium Copper is trading four times higher than aluminium Substitution from copper to aluminium will be constrained due to the superior electrical conductivity properties 2,0 1,5 1,0 0,5 0,0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 7
Volatility Historical Volatility 80% 12000 70% Average Volatility Copper (3M Forward) 60 Day Volatility 10000 60 Day Volaility is nearing at all-time low 60% 50% Price 3 M Forward 8000 Historic price movements to the upside is indicated by low volatility 40% 6000 30% 4000 20% 10% 2000 0% 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 8
Long term capital flows Investors have pulled out of commodities lately but Oil speculation $120.000 $100.000 $80.000 Net Long Position Non Commercials in Mio. USD (nom.) Net Long Position Non Commercials, 52-week Average Net Long Position Non Commercials in Mio. USD 2001 prices (real) Net Long Position Non Commercials 2001 prices, 52-week Average Agri speculation $60.000 $40.000 $20.000 $0 -$20.000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 9
Short term capital flows stayed loyal to copper! Non-Commercials vs. Nearby Copper Future 40.000 30.000 20.000 10.000 CFTC Net Non-Commercial Futures and Options (lhs) Comex Copper (Nearby) (rhs) 500 450 400 350 300 0 2008 2009 2010 2011 2012 2013-10.000-20.000-30.000-40.000 250 200 150 100 50 0 10
Overview Individual Commodity Forecasts Sector Overweight Slight Overweight Neutral Slight Underweight Underweight Energy Crude Oil WTI Heating Oil Gasoline Brent Industrial Metals Nickel Copper Aluminium Lead Zinc Tin Precious Metals Platinum Palladium Silver Live Cattle Livestock Feeder Cattle Lean Hogs Grains Soybeans Corn Wheat Cotton Softs Sugar Coffee Cocoa Natural Gas Gold 11
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