Copper prices have fallen 21% since reaching a high of $3.9785 per pound in February 2012. Copper has been called the commodity “with a doctorate in economics” because its price tends to reflect the health of global manufacturing. Prices have fallen 13% this year alone. China is the top consumer of copper in the world, accounting for 40% of global demand. A slight contraction in China’s economy since the last quarter of 2012 is obviously a concern to traders. Supplies of copper stored in warehouses overseen by the London Metal Exchange (LME) are up 92% this year as a result of production by new and expanded mines. However, mines are not expected to delay new projects or shut down production unless prices approach $2.80 per pound, according to one industry expert. With prices settling at $3.1515 per pound last week, there is still a lot of room for prices to fall. The old stock market adage about not trying to catch a falling knife comes to mind right now.
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53,000 new construction jobs added in California
California tends to have the reputation of being Ground Zero for all sorts of problems, but there have been a lot of positive signs in the past couple of years. Exports are at an all-time high, for example. Many people do not realize that we are the biggest producer of rice in the United States, and perhaps you have heard of our wine industry? There is almost nothing that grows in the United States that is not grown in California.
This rebound is starting to include construction. The state Employment Development Department reports that 53,000 construction jobs have been added in California during the past two years. While the number of construction jobs is well below the peak of 2006 (as seen in the graphic below produced by the San Francisco Chronicle) the housing bubble was still in effect back then. Construction employment will not reach those levels again for quite some time, if ever.
Nevertheless, California is embarking on a +$100B high-speed rail project this summer, and if Gov. Jerry Brown has his way, a $11B water diversion project in the delta area may start in 2014. Construction employment numbers should continue to improve for the next several years for these reasons alone.