Tag Archives: copper updates

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.