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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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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.

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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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