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Copper drops 1% as dollar strengthens ahead of Bernanke

17 Jul

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Copper futures came under heavy selling pressure on Wednesday, as the U.S. dollar strengthened ahead testimony on monetary policy by Federal Reserve Chairman Ben Bernanke later in the day.

On the Comex division of the New York Mercantile Exchange, copper futures for September delivery traded at USD3.139 a pound during European morning trade, down 1.4% on the day.

New York-traded copper prices fell by as much as 1.5% earlier in the day to hit a session low of USD3.137 a pound.

Copper prices struggled for upside traction due to a broadly stronger U.S. dollar, as dollar-priced commodities become more expensive to investors holding other currencies when the greenback gains.

The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was up 0.2% to trade at 82.80.

Market participants looked ahead to Bernanke’s testimony on monetary policy amid speculation over the timing of a possible reduction to the bank’s USD85 billion-a-month bond buying program.

Copper prices advanced 2.7% last week after Bernanke said the Fed will continue to maintain accommodative monetary policy for the foreseeable future.

Investors also looked ahead to the release of key U.S. data on housing starts and building permits later in the day.

Any improvement in U.S. economic activity could scale back expectations for further easing, boosting the dollar and weighing on silver.

The Fed’s stimulus program is viewed by many investors as a key driver in boosting the price of commodities as it tends to depress the value of the dollar.

Elsewhere on the Comex, gold for August delivery shed 0.5% to trade at USD1,284.05 a troy ounce, while silver for September delivery fell 0.9% to trade at USD19.74 a troy ounce.

Moves in gold and silver this year have largely tracked shifting expectations as to whether the U.S. central bank would end its bond-buying program sooner-than-expected.

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China Copper Prices May Witness New Lows in Q4 2013: Barclays

29 Jun

“Our economists have cautioned that implementation of the new government’s agenda of no stimulus, deleveraging and structural reform means there is an increasing downside that China could experience a temporary hard landing in the next three years,” the bank noted.

copper updatesLONDON : Copper prices in China may witness new lows in the fourth quarter of this year on rising copper mine supply, recent liquidity tightening and lower base metals consumption, stated London based Barclays in its recent market analysis.

“Our economists have cautioned that implementation of the new government’s agenda of no stimulus, deleveraging and structural reform means there is an increasing downside that China could experience a temporary hard landing in the next three years,” the bank noted.

In the first quarter of 2013, world copper consumption is estimated to have declined by around 5.3% compared with that in the same period of 2012, according to International Copper Study Group (ICSG). Chinese apparent demand declined by 10% owing to a 46% decline in net imports of refined copper.

Excluding China, year-on-year world copper usage declined by around 1.7%. On a regional basis, usage is estimated to have declined by 7.8% in Africa, 1.8% in the Americas, 7.6% in Asia, 0.2% in Europe, and 14.3% in Oceania.

World mine production is estimated to have increased by almost 11% in the first three months of 2013 year-on-year basis mainly owing to a recovery in production levels from constrained output in early 2012.

Meanwhile, according to ICSG projections for 2013, the global copper market is expected to have a production surplus relative to demand.

World production of refined copper is expected to exceed demand for refined copper by about 415,000 t, as demand will lag behind the growth in production. For 2014, although a recovery in usage is anticipated, a higher surplus is expected with increased output from new and existing mines.

Freeport McMoRan has restarted open pit production at its Grasberg mine in Indonesia, and the company expects underground mining to resume shortly. Furthermore, the labour contract negotiations have yet to be restarted, a process that poses a further risk of disruptions, according to Barclays view.

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China tight manufacturing, interest rates drag Copper down

20 Jun

Rise in interbank rates in Chinese markets to 12% gives out the impression that China is hitting on momentum brakes and provides for assumptions that the economy there is undergoing a deliberate slow down.

MUMBAI: With Chinese manufacturing shrinking at enhanced speed this month as reflected in HSBC-Markit PMI readings, questions are raised on the future prospects of copper.

The PMI reading came at 48.3 well below the 50 mark that separates expansion from contraction; of course, below-50 readings are indicative of contraction in the economy.

This, coupled with rise in interbank rates in Chinese markets to 12% gives out the impression that China is hitting on momentum brakes and provides for assumptions that the economy there is undergoing a deliberate slow down.

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The rates climbed as the central bank of China “refrained from using reverse-repurchase agreements to inject cash into the financial system,” as per Bloomberg.

“If market rates remain at such high levels, the only scenario for the Chinese economy is a hard landing,” said Xu Gao, chief economist with Everbright Securities Co. in Beijing to Bloomberg.

“That possibility is growing now — it seems the leadership is deliberately taking a wait-and-see stance to see how low China growth can be,” he noted.

Meanwhile, Barclays in a report said that, “copper dominated by construction and infrastructure spending may be seeing a shift to permanently slower demand growth.”

“Sentiment among traders in China has shifted from short-term bullish to cautious on copper. On the one hand, refined supply remains tight in China due to smelter maintenance and scrap shortage, and physical premiums remained at elevated for domestic spot market and bonded warehouse stocks. On the other hand, LME prices fell sharply on bearish macro developments and failed to rally on supply disruptions which is viewed as a negative for future price action,” Barclays report added.

On the Comex, copper for delivery on July 13 was seen trading at $3.098 a pound, a loss of $0.041 or 1.31% as of 10.33 AM IST.

On the MCX, copper for delivery on June was seen trading down by 0.12% at Rs.407.85 as of 10.33AM IST.

Copper above $7,500/t an opportunity to short: Barclays

8 Jun

LONDON : Copper price movement above $7,500/ton is an opportunity to sell the base metal on likely slowing Chinese consumption over the summer alongside further supply increase through second half of the year, stated London base Barclays in a report.

Copper prices are expected to witness a fall in the second quarter of this year on improved supply. The bank favours selling into rally in the base metal.

However, in the short term the commodity’s prices may go up on recent supply disruptions, fall in scrap supply and short positioning as well as seasonal improvement in Chinese demand.

Reports suggest that, the mining activities at Grasberg, world’s second largest copper mine would remain shut till a government enquiry ends on tunnel mishap that killed mine workers. The mine is expected to remain shut for three months, according to the reports.

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Closure of mine for three months mean loss of 120 Kt of copper production, the bank said. However, it was subsequently noted by the Indonesian economics minister that the investigation should proceed as quickly as possible, suggesting that the shut-down could be much shorter.

Furthermore, the bank believes that there is probably about one month of inventory held by the mine, which could help to further offset the net production loss. So the potential lost production could range from 40-120Kt.

Supply disruptions in Copper, Platinum, Crude Oil and Grains possible: Barclays

1 Jun

Though the year so far has seen positive momentum when it comes to supply side of various commodities, Barclays does not expect the same to be the case as we move forward into the second half of the year. This applies to commodities like copper, platinum, crude oil and grains. Approaching the commodities one at a time would give us a better picture.

Copper

Monthly production data of copper from Chile, amongst the world’s biggest producers of copper, says that April saw the commodity declining in production by 1.2% y/y and 9% m/m. This is the first decline registered this year subsequent to an output growth of 7% y/y in Q1.

Platinum

There is an upcoming worker wage negotiation in South Africa with the political party of AMCU attending the talks for the first time. If the talks get protracted or a labour action stems from the same, supply disruptions may get to be the norm.

Crude oil

The Sudanese exports have been resuming slowly even as Yemen’s Marib pipeline has been repaired. But it may not be time for rejoicing as both developments are reversible. Yemen’s pipeline could be attacked yet again by the militants (“the frequency of pipeline attacks in Yemen have not faded and risk remains for a relapse”); nature of relationship between North and South Sudan being volatile, the crude oil flows may not be as reliable.

Besides the domestic conflicts and geopolitical factors are not favorable in Iraq, Libya and Nigeria.

Grains

Rain and wet weather have been playing dampeners as delays surface in US spring plantings of corn and soybeans.

 

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Trading tips for nickel, copper, crude & silver

28 May

Commodity-trading

Sumeet Bagadia of Destimoney Commodities recommends selling nickel. “Rise in prices till Rs 830 per kilogram in MCX should be used as selling opportunity with a stop loss to be placed at Rs 845 per kilogram on higher side for initial target of Rs 810 per kilogram and if prices are able to break and give close below Rs 810 per kilogram then further selloff can be seen till Rs 790 per kilogram in next two-three days,” Bagadia adds.

Priyank Upadhyay of SSJ Finance & Securities suggests buying silver around Rs 43,300 per kilogram with stop loss below Rs 42,700 per kilogram and target around Rs 44,000 per kilogram followed by Rs 44,500 per kilogram.

Hitesh Jain of IIFL advocates selling copper June contract around Rs 407.50 per kilogram with target of Rs 402 per kilogram and stop loss of Rs 411 per kilogram.

Sreekanth Jha of PJ Commodity Ventures advises selling crude at Rs 5,250 per barrel and look at covering at Rs 5,100 per barrel.

 

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Copper prices above Dollar 7,500/t is an opportunity to short: Barclays

18 May

The potential for further short-term dislocations in refined supply as a result of these factors. Lower global IP levels are contributing to the tightness in scrap, though low prices have also been a major factor, so even a brief period of price strength should help to ease some of the tightness.

copper updates

LONDON (Commodity Online): There is further upside to the recent short covering in copper given positive demand signals from China and market positioning that is still short. And prices above $7,500/t is an opportunity to short copper, said Barclays in a report.

Despite subdued macro news and data flow, micro copper related data signals from China remain positive, with the import arb still open, physical premiums high, SHFE time spreads in backwardation, bonded and SHFE stocks falling and end-demand indicators expanding.

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This should lend support to prices in the short term, though Chinese buying could start to run out of steam in July/August.

Despite strong growth in copper mine supply, refined supply has been lagging due to smelter disruptions and tight scrap supply.

Chinese smelters, which have become more reliant on scrap, recently announced up to 50Kt of production cuts as a result of scrap tightness.

The potential for further short-term dislocations in refined supply as a result of these factors. Lower global IP levels are contributing to the tightness in scrap, though low prices have also been a major factor, so even a brief period of price strength should help to ease some of the tightness.

“We have reduced the disruption allowance in our 2013 supply-demand balance by 0.5% to account for the loss from the Bingham Canyon landslide and the potential for lower disruption this year,” the bank noted.

“We would caution, however, that although copper supply is expected to be strong this year, the market is in danger of being complacent on this topic. Tighter scrap supply may to some extent offset strength in mine supply and lend support to prices, in our view,” Barclays concluded.

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