Copper traders are the most bullish in two months on speculation that demand will strengthen from the US to China at a time when stockpiles monitored by the world’s biggest metals exchange are at a 2 ½-year low.
Fourteen of 29 analysts surveyed by Bloomberg expect the metal to gain next week and 10 were neutral, the highest proportion since December 23. Inventories tracked by the London Metal Exchange are set for a fifth consecutive monthly drop and money managers have their biggest bet on rising prices since early August, Commodity Futures Trading Commission data show.
Global equities and commodities climbed to at least six- month highs this week after euro-area finance ministers approved 130 billion euros ($173 billion) in aid for Greece to avert an economic collapse. China said February 18 that it will cut banks’ reserve requirements to boost growth and US indicators pointed last week to sustained economic expansion as Barclays Capital anticipates a third consecutive copper shortage this year.
“Copper is benefiting from very positive sentiment and from high levels of liquidity,” said Daniel Briesemann, an analyst at Commerzbank AG in Frankfurt. “It’s being driven by restrained supply and robust demand.” The metal rose 11 per cent to $8,410 a tonnes this year on the LME, the best start since 2008. The Standard & Poor’s GSCI gauge of 24 commodities climbed 9.8 per cent and MSCI All- Country World Index of equities gained 11 per cent. Treasuries lost 0.4 per cent, a Bank of America Corp index shows.
China measures
The People’s Bank of China said that the proportion of cash that lenders must set aside will fall half a percentage point from on Saturday, with Standard Chartered Plc and HSBC Holdings Plc predicting more reductions this year. The 0.4 per cent increase in the Conference Board’s gauge of the US outlook for the next three to six months on February 17 followed a 0.5 per cent increase in December, the strongest back-to-back gain in almost a year.
China consumes about 40 per cent of the world’s copper and North America accounts for about 11 per cent of demand. Refined production of the metal lagged usage by 119,000 tonnes in November, the most since March 2010, the International Copper Study Group said Thursday. Barclays estimates a shortage of 376,000 tonnes this year, and another shortfall in 2013.
The International Monetary Fund forecasts growth of 8.2 per cent in China this year will drive a global expansion of 3.3 per cent. Inventories of copper monitored by the LME slid 36 per cent since October to 303,500 tonnes, the lowest level since September 2009, exchange data show.
Shanghai stockpiles
While combined stockpiles tracked by bourses in London, New York and Shanghai slid 7.7 per cent since October, Shanghai copper inventories more than doubled this year, the data show. China’s manufacturing may shrink for a fourth month in February, a February 22 preliminary reading from HSBC and Markit Economics showed, as exports are capped and the housing market cools.
Refined copper imports by the nation fell 18 per cent in January from a record in December, the first decline in eight months, according to Bloomberg calculations based on February 21 data from the General Administration of Customs. Imports may decrease this year, Jacob Shen, a trader at INTL FCStone Inc, said in an interview in Singapore Thursday.
Europe remains a risk to commodities used in construction and industry, even after ministers approved a second bailout and persuaded investors to provide more debt relief to Greece. Europe’s economy will shrink 0.3 per cent this year, the European Commission said Thursday, abandoning a November forecast of 0.5 per cent growth.
‘Temporary solution’
Copper benefited “from the temporary resolution of Greece’s financial woes,” said Mark Lewon, the president of Utah Metal Works Inc, a Salt Lake City-based company recycling industrial scrap. “I fully expect Greece to continue to have problems as government revenues fail to reach the levels expected due to the contraction in the economy.”
Goldman Sachs Group Inc expects the metal to fall to $8,000 in three months before rebounding to $9,000 in a year, 7 per cent above on Saturday’s price. The bank on February 22 cut its prediction for commodity returns to 12 per cent from 15 per cent after prices rallied this year.
Hedge funds and other money managers are getting more bullish. Speculators raised their net-long position in copper by 20 per cent to 14,817 futures and options in the week ended February 14, the highest level since August 2, CFTC data show. Wagers on higher prices more than tripled since mid-January.
Gold survey
Seventeen of 23 traders and analysts surveyed by Bloomberg expect gold to gain next week. Futures on the Comex in New York rose 14 per cent to $1,781.20 an ounce this year after a 10 per cent increase in 2011. Holdings in gold-backed exchange- traded products stand at 2,391.9 tonnes, less than 0.1 per cent below the record in December, data compiled by Bloomberg show.
Eight of 11 people surveyed expect raw-sugar prices to increase next week. The commodity gained 6.6 per cent this year to 24.84 cents a pound on ICE Futures US in New York.
Ten of 21 people surveyed anticipate higher corn prices next week, while 15 of 22 said soybeans will climb. Corn fell 1 per cent to $6.40 a bushel this year as soybeans gained 6.2 per cent to $12.825 a bushel.
“We had a huge rally already in many commodities,” said Jesper Dannesboe, an analyst at Societe Generale SA in London. “In the near term I think a correction could come, or at least a consolidation, and then you should maybe try to buy on those dips. We’re moderately bullish.”
