COMMENTARY — Copper in the 1990s

Copper is an investment idea for the 1990s. For the past 70 years, world copper consumption has mirrored industrial production. Industrial production is now increasing dramatically because various regions of the world are shifting from an agricultural economy to an industrial economy.

As more and more agricultural populations get involved in the industrialization process, the need for copper will increase. Because of the vast size of the populations in China, the former Soviet Union, Eastern Europe and the Pacific Rim (3.2 billion people), copper usage can increase dramatically with only a small advancement of industry. This is one of the reasons why we are bullish on copper for the 1990s. Annual per-capita demand (consumption) for copper has basically been 10 lb. since 1968. The key age group for this demand is the population over 20. There were one billion children born in the decade 1972-82. Therefore, the population in the world of people over 20 years old will increase by more than one billion people between 1992 and 2002.

If the demand for copper continues at 10 lb. per person, the result will be an increase in demand of at least 10 billion lb. per year by 2002. World mine production is currently only about 22 billion lb. per year and many mines are running out of ore.

In addition, a much larger portion of the new billion population group (as well as the population in general) will be involved in industrialization (because of the fall of communism) and these numbers, at best, are conservative. Therefore, the growth in copper consumption could outstrip the supply by a significant amount. The bottom line is that there isn’t going to be enough copper to go around.

Also, copper inventories are currently at historic lows, and if there is even any kind of a slight recovery from our recession, or if the Europeans come out of a recession, demand is going to pick up briskly.

— From a recent research report by Kenneth J. Gerbino & Co., Beverly Hills, Calif.