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Copper Futures – Copper traders are bullish for the first time in six weeks on mounting confidence that demand will accelerate in line with economies at a time when mining companies are already failing to keep up with consumption.
Eleven of 29 analysts surveyed by Bloomberg expect the metal to climb next week and 10 were neutral. Rio Tinto Group (RIO), based in London, said April 17 that its first-quarter copper output slid 18 percent because the ore mined contained less metal. Codelco, the largest copper producer, said the following day that it sees no weakening in Chinese buying. Barclays Capital is predicting a third consecutive year of shortages.
The International Monetary Fund raised its global growth forecast for the first time in more than a year on April 17. Industrial production in China, the biggest copper consumer, expanded 11.9 percent in March, exceeding economists’ forecasts, the government said April 13. The Bank of Japan is “committed” to monetary easing to shore up the economy, Governor Masaaki Shirakawa said April 18.
“You’re beginning to see an improvement in global growth,” said Nic Brown, the head of research at Natixis Commodity Markets Ltd. in London. “China has a slightly slower growth rate, but the economy itself is growing so rapidly that it represents a very substantial increase in demand. You’re going to have a very substantial copper deficit this year.”
Copper rose 7.8 percent to $8,192.50 a metric ton this year on the London Metal Exchange, rebounding from a 21 percent decline in 2011. The Standard & Poor’s GSCI gauge of 24 commodities climbed 5 percent and the MSCI All-Country World Index of equities advanced 9 percent. Treasuries gained less than 0.1 percent, a Bank of America Corp. index shows.
Central banks are keeping open options for further stimulus to sustain growth that spurred investors to add about $4.65 trillion to the value of global equities this year. Federal Reserve policy makers Janet Yellen and William C. Dudley endorsed the view last week that the Fed should hold its target rate for overnight loans between banks near zero through 2014. North America uses about 11 percent of the world’s copper, China 40 percent and Japan 5 percent, according to Barclays.
The bank predicts a shortage of 278,000 tons this year, almost enough to supply Europe for a month. Stockpiles monitored by the LME dropped 30 percent since the start of January while those tracked by the Comex exchange in New York declined 8.7 percent, data from the bourses show.
Investor confidence in Germany, Europe’s largest economy, unexpectedly rose to a two-year high in April, the ZEW Center for European Economic Research said April 17. U.S. consumer confidence matched a four-year high in the week ended April 15, the Bloomberg Consumer Comfort Index (MXWD) shows. The IMF raised its global growth outlook to 3.5 percent from 3.3 percent.
Copper for immediate delivery costs $47.50 a ton more than the benchmark three-month contract on the LME and the premium reached $114 on April 17, the most since 2008. While that might indicate mounting concern about near-term supply, it also may be a result of the ownership of inventories. One unidentified party held at least 90 percent of reserves and open positions for the next three days as of April 18, bourse data show.
The premium will probably decline in the next two months as China taps stockpiles and imports decline, Goldman Sachs Group Inc. said in a report yesterday. The nation’s inventories in bonded warehouses that are exempt from a value-added tax and import duties have surged to more than 600,000 tons, from less than 100,000 tons in 2008, the bank estimates.
China’s copper imports were 462,182 tons in March, 4.6 percent less than in February, customs data show. The nation’s economy expanded 8.1 percent in the first quarter, the slowest pace in almost three years, according to government data.
Copper prices fell to a three-month low earlier this week on concern that Europe’s debt crisis will derail the region’s recovery. The IMF anticipates the 17-nation euro region will contract 0.3 percent this year. Europe uses about 18 percent of the world’s copper and regional demand will slip 2 percent this year, Barclays estimates.
Hedge funds and other speculators cut their wagers on higher prices by 84 percent in the week ended April 10 to 2,955 U.S. futures and options, data from the Commodity Futures Trading Commission show.
Copper will average $9,000 a ton in the third quarter, the highest quarterly average in a year, according to the median estimate of the top five industrial metals analysts in Bloomberg Rankings in the past two years. Prices reached an all-time high of $10,190 in February 2011.
“Supply and demand continue to look quite tight for this year,” Diego Hernandez, chief executive officer of Codelco, said in an interview in Santiago on April 18. “The industry is optimistic we will have a very good year again.”
In other commodities, 15 of 31 traders and analysts surveyed by Bloomberg said gold would gain next week and six were neutral. Futures on Comex increased 4.9 percent to $1,643 an ounce this year. Prices gained the previous 11 years and holdings in gold-backed exchange-traded products are about 0.7 percent below the record 2,410.2 tons set March 13, data compiled by Bloomberg show.
Six of 13 people surveyed expect raw-sugar prices to decline next week and four were neutral. The commodity slipped 7.5 percent to 21.55 cents a pound on ICE Futures U.S. in New York this year.
Fourteen of 27 people surveyed anticipate lower corn prices next week, while 16 of 28 said soybeans will retreat. Corn dropped 7 percent to $6.01 a bushel this year as soybeans advanced 19 percent to $14.4275 a bushel.
“It’s going to be a bit rocky for the next month or two,” said Dan Smith, an analyst at Standard Chartered Plc in London. “The situation around Europe has deteriorated. The view on liquidity is really important.”
Gold survey results: Bullish: 15 Bearish: 10 Hold: 6
Copper survey results: Bullish: 11 Bearish: 8 Hold: 10
Corn survey results: Bullish: 10 Bearish: 14 Hold: 3
Soybean survey results: Bullish: 9 Bearish: 16 Hold: 3
Raw sugar survey results: Bullish: 3 Bearish: 6 Hold: 4
White sugar survey results: Bullish: 2 Bearish: 6 Hold: 5
White sugar premium results: Widen: 3 Narrow: 2 Neutral: 8
- Nicholas Larkin in London at Bloomberg.