Sell in May?
Though often incorrect, so-called sell in May has a slight tinge of truth to it, at least with respect to copper prices. On average over the last 10 years the worst month of the year for prices is May, with prices averaging -3.15%. Though we remain firm believers in the metals long-term fundamentals, it's fair to say that there do appear some shorter-term risks. For example:
Net Longs have collapsed:
And inventory levels are reasonably high:
Bonded inventories have also been increasing, from ~435kt in November to ~475kt now. Whether these indicators actually lead to a price correction is debatable, but at the very least it does suggest some caution is warranted. Looking at the sector on our numbers:
Copper Sector Valuations:
Not overly cheap as a whole, with producing copper M&A having historically been done at 1.1x NPV
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