Copper prices are unlikely to fall much from current levels as prices have corrected significantly from april this year and at lower levels demand support is expected while some new mining investments are being differed which are also expected to limit supplies in medium term.
In the last three months, prices on the LME have declined by 13.28% dragged by the Eurozone crisis and the slowing growth in China. On March 13, three-month copper on the LME was trading at $8,530 per tonne, declining to trade at $7,397.50 a tonne on June 13.
Prices are already near their base level of $7,000 per tonne. A further fall is unlikely and the downside risk is limited unless the Eurozone crisis worsens significantly, Gayle Berry, base metal analyst from Barclays Research told Business Standard today.
At lower levels some demand support from China has already come in, containing the fall.
While China's macroeconomic story also fails to impress as its industrial output and retail sales trailed estimates but demand for copper tells has gone up. In May 2012, the country imported 419,740 tones of copper though it went mostly for inventory build-up.
In a development that could change medium to long term supply scenario, some investments in mining internationally are being differed. Codelco, the Chilean state copper producer, said on Wednesday that some mining companies are differing investment which is likely to eradicate expectations of copper market surplus in 2015 too. Hence, the deficit copper market situation is likely to continue, proving to be bullish for prices.
The International Copper Study Group also expects the world to be in a deficit for the third consecutive year. The deficit is likely to be 240,000 tonne this year, the report says. This would limit the fall in copper prices despite the macroeconomic concerns looming markets.
More From This Section
In very near future, investors are cautious as they await Greece to go to the polls on June 17, in a vote that may determine whether the country stays in the Eurozone. If the Left government, lead by Alex Tsipras, comes into power then his agenda starts with cancelling the bailout terms and pass laws to implement austerity, which may put the country at logger-heads with the European Union and up its changes of being kicked out of the single currency unit.
Keeping in mind the uncertainty in markets, prices, may fall to $7,000 - $7,100 level per tonne, Reena Walia, analyst with Angel Commodities said, a 4.5-5% decrease from current levels.
As China is known for buying the metal at lower levels, the continuing demand for the base metal is likely to cushion the fall in international copper prices, Walia said.
Looking at this, even Gayle Berry hedged her comment by saying that, “There are great risks on the horizon and the macroeconomic crisis will continue to be a major concern for the next few months.” According to her until there is clarity on which way Europe is moving, prices are likely to remain sideways.
Copper prices may rebound in the third quarter or the second half of the year if the Chinese economy picks up pace as expected, believes Berry.
Demand in the Indian markets is good, she said, capping the fall in prices on the MCX, despite a significant decline on the LME. Ashok Bafna, president, Bombay Metal Exchange said that demand in India is good and is likely to continue. The current price levels is right time for investors to buy the metal, he said.
Rajesh Bhayani
Associate Editor
09769265687