Boletines
MARKET COMMENTARY
Commodities continued to lose ground over the course of November, with oil staging one of its most dramatic monthly declines in years. In the metals group, the LME complex ended the month mixed, but copper proved to be the exception, collapsing to eight-month low on Friday and now within striking distance of its 2014 trough.
Copper shed $200/MT on the last day of the month. Clearly, the recent collapse in oil is impacting the complex, already under pressure on account of China-related growth concerns. The macro deceleration in China has prompted the government to drop rates for the first time in two years and many are saying that more cuts are on the way. On the trade side, Chinese refined copper imports rose to 305,772 tons in October from 292,620 tons a year earlier, continuing a multi-month recovery. However, this uptick is occurring against rising local production, now at 732,000 tons in October, up 13.61% from a year earlier. Participants also continue to guess about SRB purchases; the Bureau reportedly bought 500,000-700,000 tons of copper through 2014, well above target, but its actions are doing little to turn the market around. In the meantime, the latest ICSG report shows an 83,000-ton surplus in August compared to a 40,000-ton surplus in July. So we expect copper to trend lower in December, pressured by the continued strength in the dollar (particularly against the yen), lackluster Chinese macro data, more concentrate supply, a wobbly energy complex and poor technicals. On the latter point, should prices break below the March 2014 intraday low of $6321, we could set up an eventual decline to $6,000. On the upside, we see resistance at $6650.
London copper edged lower in this session, under pressure from dollar strength and uncertainty over demand for industrial metals, although falls were limited by data showing the services sector in China grew marginally faster in November.
A buoyant U.S. dollar contributed to a fall in the euro to its weakest level in more than two years, which put pressure on metals prices. A strong dollar makes commodities priced in dollars more expensive for holders of other currencies.
Three-month copper on the London Metal Exchange (LME) fell 0.7 percent to $6,360 a tonne in official trading.
The metal, which is used in power and construction, fell to a 4-1/2 year low of $6,230.75 a tonne on Monday, tracking a slide in oil prices. It is down more than 13 percent in the year to date.
Helping to prevent further falls, China's services sector grew marginally faster in November, surveys showed, a welcome respite after a run of underwhelming data from the world's top copper consumer as it faces its worst slowdown in at least six years.
But analysts said credit difficulties in China were keeping bargain-hunting in check.
"It just seems like there is so much less activity because of the credit constraints in China," Morgan Stanley analyst Joel Crane in Melbourne said.
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Unlike many other commodities that got hit in the aftermath of a stronger dolar and surging US equity markets, base metals held up fairly well in October. Copper was a case in point, finishing slightly higher on the month after rebounding from a five-month low of $6530. We suspect the firmer tone was due to a number of things, one being the significant revision by the ICSG on its supply/demand balances. The Group now says that the market will be in a deficit of 270,000 tons this year before switching to a surplus of about 390,000 tons in 2015. In addition, both LME as well as Shanghai inventories have been trending lower for much of the year, not indicative of a well-supplied market. Meanwhile, Chinese trade numbers for September show refined copper imports bouncing to a five-month high (despite local production soaring to a new record), but the report did not have much of an impact, as the talk was that the copper could be getting reexported in product form.
Copper came under heavy pressure this morning. Interestingly, the copper spreads eased with the weakening price suggesting a degree of panic in the move. The latest LME data stil show the presence of a dominant position holder of cash and tom warrants.
Copper fell to a two-week low in this afternoon on worries over slowing growth in Europe and China, a surging dollar and weakening oil prices, though losses were kept in check by supply delays in Peru. Three-month copper on the London Metal Exchange fell to $6,543.50 a tonne, before recovering slightly to trade at $6,584 in official rings, down 1 percent.
The dollar rose to a seven-year high against the Japanese yen after a victory by Republicans in the U.S. mid-term elections, while Brent oil dropped to a new four-year low below $82 a barrel. A strong dollar makes dollar-priced metals costlier for non-U.S. investors.
On the demand side, China's state power grid, its biggest buyer of copper, is set to roll out more power lines. China has begun construction of a large-scale, ultra-high voltage power project, which will help alleviate air pollution problems, the State Grid Corporation of China said on Tuesday.
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In September the commodity group has been pressured by a stronger dollar, has staged a meteoric rise over the past three months and is now at a fouryear high against a basket of major currencies. In addition, a rebound in US equity markets continues to siphon money away from commodities. Weaker macro numbers, particularly out of China and Europe, have not helped commodity demand either. In the non-ferrous space, copper had its biggest monthly loss since March and there was widespread weakness in nickel and aluminum prices as well.
The stronger dollar was a common theme that unhinged many metal complexes last month, but copper was also weighed down by demand concerns emanating from China. To wit, the China’s manufacturing activity is basically dead in the water, with the official HSBC PMI number coming in at 50.2 in September, flat vs. August, while the official PMI was at 51.1, unchanged from last month. Moreover, Beijing’s various ministimulus programs seem to have failed to revive borrowing, even at low rates.
Copper and other base metals rebounded on Thursday after U.S. central bank authorities signalled they would not rush to boost interest rates, extending a period of cheap capital for industry and investors. The London Metal Exchange (LME) saw gains across the board, joining broader financial markets in responding to the release of the minutes of the last Federal Reserve policy meeting.
The dollar fell and stocks soared as investors factored in a longer time frame before any rate rises. The dollar had enjoyed 12 consecutive weeks of gains since early July, the U.S. currency's best run in more than 40 years. The strong dollar had weighed on commodity markets, making dollar-priced materials more expensive for European and other non-U.S. investors.
"It was a surprise, definitely everyone thought the dollar strength would go in one direction," said Eugen Weinberg, head of commodity research at Commerzbank in Frankfurt.
Three-month LME copper gained 1.2 percent to $6,712 a tonne by in official midday trading, erasing the prior session's small losses. LME copper is climbing away from 5-month lows at $6,600 a tonne tapped on Oct. 2.
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Copper dropped 2.2% in August, its biggest monthly dip since March. The complex was weighed down by demand concerns after a steady stream of disappointing data came out from both Europe and China of late. Although US manufacturing readings remain strong, Chinese and European figures have clearly disappointed, with the latest European number (out this week) now on the verge of contraction. With regard to trade data, China’s July refined copper imports fell 16.7% on the year, as the fallout from slower demand and the port scandal both take their toll. However, we should note that rising local production is also eating into the import share; Chinese refined production is now at a little over 630,000 tons in July, up 16% from a year ago.
Elsewhere, Chile’s copper output is also moving higher, up 2.4% to 3.33 million tons during the Jan-July period. State commission Cochilco is forecasting that the country will produce 5.95 million tons this year, slightly higher than last year. Separately, the latest data from the International Copper Study Group shows the global refined copper market in a 69,000-ton deficit in May, down from a 186,000-deficit in April. For the first 5 months of the year, the ICSG sees the market in a 466,000-ton deficit compared with a 251,000-ton surplus in the same period a year ago.
London copper drifted on Wednesday in low volume trade, with expectations of fresh supply weighing on prices and dampening investor interest. But predictions of fresh monetary support from the European Central Bank kept metals with tighter supply outlooks such as aluminium and zinc underpinned near their recent respective highs of 18 months and four weeks. Three-month copper on the London Metal Exchange was little changed at $6,921.25 a tonne, after logging a small gain in the previous session.
Expectations for further policy action at the European Central Bank's meeting on Thursday are running high after ECB President Mario Draghi pledged to use all available tools to keep prices in check.
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Copper had a V-shaped move over the course of the last month; after plunging to a low of just over $6600 in mid-June on account of jitters emanating from the Chinese port scandal at Quindao, prices shot up by about $600 a ton over the next three weeks.
We think a combination of variables set up this advance, with the most important being growing perceptions that the financing irregularities evident at the port were likely localized and not symptomatic of a larger problem. The second variable kicking off copper’s rally are increasing signs that the Chinese economy seems to be improving, as evidenced by rising PMI readings. Thirdly, copper inventory levels remain low, with draws continuing in both the LME and Shanghai exchanges. Finally, latest data from the ICSG has the global world refined copper market showing a 83,000 tons deficit in March compared with a 2,000 ton surplus in February.
London copper steadied today, but remained under pressure near two-month lows after new home prices in top metal consumer China fell in July for the third month in a row. Price falls in new homes also spread to a record number of Chinese cities including Beijing, underlining a worsening property downturn that is increasingly dragging on the broader economy.
Three-month copper on the London Metal Exchange was $6,874 a tonne from $6,870 at the close on Friday. The price fell by 1.8 percent last week, touching a seven-week low of $6,821 on Thursday, its lowest level since June 23.
"Base metals are under pressure this morning, although flows have been relatively light," Vicky Sanders, head of analytics sales at Marex Spectron in London, said in a research note.
ANZ strategist Daniel Hynes in Sydney views copper as oversold and that prices are getting to "relatively attractive levels". "In our view, fundamentals are improving, which opens up the scenario of upside surprise, if some of these outlying macro issues start to rectify themselves," he added.
Nevertheless, hedge funds and money managers slashed their bullish bets on copper futures and options in the latest week, the Commodity Futures Trading Commission said on Friday, as concerns resurfaced over the strength of global economic growth.
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Copper had a V-shaped move over the course of the last month; after plunging to a low of just over $6600 in mid-June on account of jitters emanating from the Chinese port scandal at Quindao, prices shot up by about $600 a ton over the next three weeks.
Copper moved in range of $6615-7025 last month. U.S. consumer sentiment rose in June as consumers remained optimistic the sluggish first quarter was due to difficult winter conditions. Euro zone economic sentiment fell unexpectedly in June on fears that fighting in Iraq would push up oil prices and that any escalation of the Ukraine crisis could drag on euro zone growth. On domestic bourses weaker local currency capped the downside to some extent.
Supply short fall and encouraging data from US and China will continue to assist the prices in the month of July 2014. The HSBC/Markit Flash China Manufacturing Purchasing Managers' Index rose more than expected to 50.8 in June from May's final reading of 49.4. Copper in LME is set for the biggest quarterly rise since September as stockpiles fell and amid bets that the U.S. economy will rebound from a first quarter contraction. Inventories monitored by the main exchanges in London, Shanghai and New York have plunged to the lowest since 2008. Copper seasonal demand is expected to wane going into the third quarter, though the shortage in supply is expected to keep a flor under prices.
Copper edged further off 4-month peaks today as investors took profit and stocks rose for a second day running, though lingering supply concerns put a strong floor under prices. London Metal Exchange data showed stocks rose by 2,850 tonnes - a second straight day of gains - though overall, stocks remain near their lowest levels in six years, supporting prices.
Three-month copper on the London Metal Exchange was last bid at $7,115 a tonne in official midday rings, down 0.49 percent. Copper closed down on Friday but still posted its biggest weekly rise in more than nine months, after touching a four-month peak earlier in the session.
Investors are waiting to see if record share prices will be justified by quarterly earnings reports and forecasts in the United States and elsewhere, with aluminium producer Alcoa kicking off the U.S. earnings season on Tuesday.
On the demand side, global economic activity should strengthen in the second half of the year and accelerate in 2015, although momentum could be weaker than expected, International Monetary Fund chief Christine Lagarde said on Sunday, hinting at a slight cut in the IMF's growth forecasts.
China's economic growth quickened in the second quarter from the previous three months, but further modest government support measures will still be needed, Premier Li Keqiang said on Monday.
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Copper had a strong showing in May, with prices rising 3.1%, the best monthly gain since December. The advance was helped by a tight supply picture, best evidenced by widening LME backs and dwindling stocks. LME holdings, for example, now stand at 166,000 tons, off a whopping 60,000 in May alone, while Shanghai has shed some 15,000 tons over the period. Not surprisingly, premiums are strong, although there have been signs of softening this past week in China. Prices got an additional boost from the closure of LS-Nikko Copper’s No. 2 plant in South Korea, which is out after a steam explosion in May. Having said that, there will be additional supplies coming into the market, with most estimates still calling for a 2014 supply/demand surplus. In view of all this, the ICSG sees the global world refined copper market in a 5,000-ton-deficit through February following 123,000 ton shortfall in January; CRU also has the market as in deficit for Q1.
Three-month copper on the London Metal Exchange had inched up 0.5 percent to $6,651.50 a tonne, from the previous session when it closed down 1 percent and dropped to a six-week low of $6,620 a tonne.
China's new bank lending and money supply rose faster than expected in May, as the government ramps up policy stimulus measures to energise a slowing economy.
U.S. retail sales rose less than expected in May and first-time applications for jobless benefits increased last week, but the data did little to alter views the economy was regaining steam.
Euro zone industrial output rebounded with a twice-as-strong as expected monthly rise in April thanks to energy and non-durable goods production, official data showed on Thursday, pointing to an acceleration of economic growth in the second quarter.
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Copper traded pretty much within the range of $6530-$6790for much of April, with an upward bias evident. Nevertheless, the stronger tone was not as pronounced as some of the other metals, mainly because of copper’s less-than-inspiring fundamentals. For one thing, China’s manufacturing activity remains lackluster – the latest flash HSBC PMI for April, out last week, came in at 48.3, slightly higher than March’s 48.0 reading but still in contraction mode. This is the fourth month in a row that the number is below 50 and comes after China’s first-quarter economic growth (at 7.4%) clocked in at its slowest pace in six quarters.
On the supply side, both Rio Tinto and BHP announced decent guidance for copper output this year; Rio expects to produce 830,000 tons in 2014, unchanged from 2013, while BHP is looking at 1.1 mln tons this year, rising to 1.3 mln tons in 2015. year. In addition, Mongolian copper conc volumes surged 53% year-on-year in March, as the Oyu Tolgoi project cranks up. Miners operating from Indonesia, including Freeport and Newmont, are not faring as well given the continued supply restrictions on concentrates. Chile is expected to do well, expected to produce 6.07 million tons of copper this year and 6.24 million in 2015. On the demand side, Chinese copper demand remains decent, with premiums now at their highs for the year. In addition, the government has entered the market to scoop up 200,000 tons for its stockpile last week, but prices hardly responded, somewhat par for the course.
Copper rose on Friday but was set to log its biggest weekly loss in seven after the United States' decision this week to further trim its stimulus programme, which has provided commodity markets with liquidity.
Trading was quiet though due to a holiday in top copper consumer China and ahead of a U.S. jobs report, which is expected to show that a strengthening economy likely encouraged employers to maintain a strong pace of hiring in December.
Three-month copper on the London Metal Exchange, untraded in official rings, was bid at $6,665 a tonne, after closing little changed in the previous session. Copper prices are down around 2 percent this week. "I suspect the market has already positioned for good employment data and a hint of more tapering," Citi analyst David Wilson said.
Solid demand from China has underpinned copper prices, and tight credit conditions has meant that fabricators in the world's top consumer of the metal have been running down their stocks, Wilson said. This has lifted China copper market premiums - the price paid on top of local cash futures prices to get metal - to the highest level in almost three years. Copper inventories in warehouses monitored by the LME are hovering at around 230,000 tonnes, down almost 70 percent from mid-2013.
Activity in China's factories increased marginally in April but export orders fell sharply, a survey showed on Thursday, adding to questions about whether the world's second-largest economy is stabilising after its first-quarter slowdown. But in the U.S., consumer spending recorded its largest gain in more than 4-1/2 years in March and factory activity accelerated last month, reinforcing views the economy was regaining steam.
China's markets were closed on Friday for a second day, while many continental European markets are set to reopen after a May 1 break. The LME will be shut on Monday due to a holiday in Britain.
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Copper prices finished February basically flat, as a mid-month advance to the $7250 level fizzled, sending values back down to the lower end of the trading range. Although LME stocks are now at 14-month low, it is what is happening in China that accounts for copper’s inability to gain much upside traction. In this regard, Shanghai copper stocks, in stark contrast to the LME, are at nine-month highs, while physical premiums are softening. Both these situations should come as no surprise in light of the fact that Chinese refined copper imports have been ramping up of late, with January intake at a record high of 536,000 tons, up a whopping 53% over the last year. However, much of this metal is not being consumed, but instead being utilized as a conduit via which importers are managing to get more credit from the banks. In the meantime, the overall copper balance seems to be tightening; Aurubis see 2014 to be in rough balance, while the ICSG thinks that the market was in a 107,000 tons deficit through November of 2013, adjusted for China’s bonded stocks. (The deficit projection reverses a surplus of 23,000 tons expected in October). However, these numbers are rather squishy given that no one knows how much stocks are indeed at hand in Chinese warehouses.
Copper rose for a second day to hit a one-week high on Wednesday as investors saw signs that tensions could be easing in Ukraine and after China's leaders affirmed a solid growth target for the year ahead. Fears of an immediate escalation of political tension were allayed as Russian President Vladimir Putin said he would use force in Ukraine only as a last resort, but he also delivered a robust defence of Russia's actions in Crimea. Also helping sentiment, China provided the strongest signal yet that the pursuit of breakneck growth was over, saying it aimed to expand the economy by 7.5 percent this year and would pursue reforms in areas ranging from finance to the environment.
Three-month copper on the London Metal Exchange hit its highest level in a week at $7,085.75 a tonne in intraday trade. It was $7,055 a tonne in official rings from $7,049.50 on Tuesday. The metal is still trading 4 percent lower so far this year.
"We are seeing a bit of a relief rally for copper after the geopolitical tension between Ukraine and Russia has eased off," said Naeem Aslam, chief market analyst at Ava Trade. Doubts remain on how far the recent rally can go while demand in top user China has been slow to gain steam following the Lunar New Year. China is the world's biggest consumer of copper, accounting for 40 percent of global refined demand. A growth target of "7.5 percent helps, but let's be realistic. From GDP alone I would be cautious to get euphoric," said analyst Dominic Schnider of UBS Wealth Management in Singapore. "Forward leading indicators do not make for a good picture. We had the weather-induced problems in the U.S. and now geopolitical concerns. Unless we see numbers really coming back with a vengeance in the U.S., it's going to be very tough for copper to hold the current levels," he added.
Traders are likely to focus on the outlook for the U.S. economy. Non-farm payrolls
numbers due on Friday are expected to provide fresh evidence on the pace of growth in the world's largest economy. Economists say U.S. job growth probably picked up enough in February to encourage the Federal Reserve to continue to scale back its monetary stimulus, although the gain is likely to be tepid given the unrelentingly harsh winter weather. "We do have Beige book numbers due today, which will tell us more clearly the impact of bad weather in different Fed regions, and this could sway the Janet Yellen’s decision on tapering," Aslam said.
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It’s been a one-way slide for copper over the course of January, with the complex limping to a two-month low of $7100 by month’s end. The turmoil in emerging markets has weighed on the complex, but investors think the main drag is coming from China, where there are more signs of macro deceleration. Furthermore, the outlook for February may not look much better, as the country is now on a one week break for the New Year, meaning that spot purchases and the pressure on nearby premiums could be muted for some time to come. Many have pointed to the decline in LME stocks as a reason to be bullish; if prices are unable to climb higher on falling stocks, they likely will fall when stocks start to move up. The odds of this happening are good, since from all accounts, we are seeing steadily rising output from both the refined and mine side of the picture. On the refined side, Chile’s December output was strong and 2013 production rose by an impressive 6.1%. We very well could be on track for another strong year this year. China’s refined output was up a staggering 13.6% in 2013, well ahead of local demand growth.
Copper prices rose on Wednesday, rebounding from two-month lows hit in the previous session, boosted by encouraging factory orders data from the United States overnight and limited short-term availability of the metal in the physical market.
Meanwhile data showing dwindling supplies of copper stocks, which raised concerns about immediate availability, also lent support to prices. The figures showed stocks in LME-registered warehouses are at their lowest level in a year at 311,225 tonnes.
Three-month copper on the London Metal Exchange traded at $7,060 a tonne in official rings, up from a close of $7,041 on Tuesday. The metal used in power and construction dropped to its lowest level since Dec. 4 at $7,016 in intraday trade on Tuesday, but a late-session rebound helped it avert a 10-session losing streak, which would have been its longest losing streak in 37 years. Prices have fallen 4 percent since January.
Investors are likely to focus on the U.S. non farm payrolls data for signs of the country's economic health scheduled for release on Friday.
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