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ASHIKA COMMODITIES AND DERIVATIVES PVT. LTD.

STRENGTH OF RESEARCH, FOUNDATION OF WEALTH


January 31st, 2011

Copper
Background
Prices are currently trading close to their all-time high, strong demand trends, low inventory
and ongoing supply constraints have reinforced our conviction that copper fundamentals
remain the strongest in the base-metal complex. The latest statistics from the International
Copper Study Group showing that the global market recorded a cumulative deficit of some
368,000 metric tons for the year to date through August, as refined consumption grew by 7.9%
and refined supply only increased by 5.3%. Even the investment demand from copper ETF
cannot be ruled out completely after growing rumor of JP Morgan warrant position at LME ( of
near 90%).

Weekly LME Copper Inventory

The above LME condition is enough to say the story that demand is brewing up again and even
the last measure from FED is also boosting the metal as recovery also ramping up from US
side. Only a black spot is definitely be the European Roulette which is the near possible danger
for the metal.

Outlook
Copper is quite a market bitter for throughout 2010 and also the other copper related market
players are showing the real guts to the market. If we compare Freeport McMoran with DJIA
then its much clear for us that the real market is playing with copper in every front. Even just
after the recession copper marks its first all time high not only in MCX but also at Shanghai to
London.

The last ICSG press release quotes that during the first nine months of 2010, world apparent
usage grew by 8% (approximately 1.09 million metric tonnes) compared with that in the same
Ashika Commodities & Derivatives Pvt. Ltd., RAJIB SEN-9007066032
Trinity, 226/1,A.J.C. Bose Rd.,
Kolkata: 700 020.
ASHIKA COMMODITIES AND DERIVATIVES PVT. LTD.

period of 2009, principally owing to recovery from weak 2009 usage levels in the European
Union (EU), Japan and the United States, where usage grew by 11%, 27%, and 7.%,
respectively. Although these year-on-year growth rates are strong, usage in the EU, Japan and
United States .remained well below pre-crisis levels (below Jan-Sep 2008 levels by 16%, 14%,
and 16% respectively). In the first 9 months of 2010, Chinese apparent usage increased by a
more modest 4.5% from the very strong 2009 apparent usage level. World mine production in
the first three quarters of 2010 continued to underperform, growing by a modest 0.8% (100,000
t) when compared to production in the same period of 2009: concentrate production grew by
0.7%.

DJIA (Green) Vs. Freeport (Blue) (Source: Yahoo)

The demand supply is really not in a balance and that’s where the Bulls will play their card. I
always prefer to gauge the market action of market with the spread and here as you all know
Copper/ Crude (Dollar Denominated) is most favorable one. The latest spread graph indicating
some more highs in copper where the target will be around 0.051. So near term strength cannot
be ruled out in copper at least in first quarter of 2011.

Ashika Commodities & Derivatives Pvt. Ltd., RAJIB SEN-9007066032


Trinity, 226/1,A.J.C. Bose Rd.,
Kolkata: 700 020.
ASHIKA COMMODITIES AND DERIVATIVES PVT. LTD.

Copper/Crude Ratio

Chinese corporate goods demand also increasing in fastest pace and trying to touch the
previous high mark of 8( Corporate Goods Index) which was recorded at 2003. So Chinese
factor is going to be a major fundamental factor for the market. May be in near term, rate hike
threat from PBOC deter the investor community but its for sure from the mining perspective
also that supply is not going to feed the demand. Declining output from established mines
underpin the broader supply worries. Mines in Chile, long the world's top copper producer, are
seeing their deposits exhausted. New projects are too small and few in number to make up for
the shrinking volumes. In addition, the possibility of supply disruptions is fresh in the minds of
market participants. The Dona Ines de Collahuasi mine was unable to fulfill contractual
obligations to ship copper following a fatal accident at its port last week. This comes shortly
after the 33-day labor strike at Collahuasi, which accounts for about 3% of annual world
supply. Even the latest round of Chinese initiative to increase domestic demand will also help
copper in a huge way.

Chinese Corporate Goods Demand ( Source: Mine web)

Ashika Commodities & Derivatives Pvt. Ltd., RAJIB SEN-9007066032


Trinity, 226/1,A.J.C. Bose Rd.,
Kolkata: 700 020.
ASHIKA COMMODITIES AND DERIVATIVES PVT. LTD.

Technical Out Look

COMEX Copper Continuous

Our proprietary oscillator HACO pointing a strong bullish continuation move in near term
though upside tilt sideways action cannot be ruled out even after the last strong move (
supported by trend line in the above figure). Traditional RSI though in overbought position but
that cannot be an argument to support the bears. Dark cloud cover at the top of the weekly
chart indicating some sort of fatigue in the bulls which also supporting our sideways move
assumption. In the case of sideways move, we can expect some sort of support zone near MA
(unit 13) which is at $4.18-4.20 range. But for a year preview, we can say that our vote goes to
copper bulls and this will be one of the hot play for entire 2011 as speculative fund increasing
their appetite out from traditional asset classes like gold, silver and crude. Even launch of
NSEL e-copper will provide opportunity for retail traders to have a taste of base metal is
delivery based portfolio. And the underlying is, we are recommending BUY on copper
(supported by another proprietary tool RSI Chrome)
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Ashika Commodities & Derivatives Pvt. Ltd., RAJIB SEN-9007066032


Trinity, 226/1,A.J.C. Bose Rd.,
Kolkata: 700 020.

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