HANOI, April 9 (Reuters) - Copper long speculators are at
risk of a price pull-back due to a delayed pick up in Chinese
demand in its traditionally strong industrial consumption season
in the second quarter.
Bullish investors, who poured money into copper eyeing a
commodity super-cycle, have already reduced exposure amid fears
of Chinese monetary tightening, a firm dollar and fresh
coronavirus lockdowns in Europe.
"There's no point having money in copper at this point
because we're not going anywhere," said commodities broker Anna
Stablum of Marex Spectron.
"The shorter-term money...has already disappeared and moved
on to where you can make more short-term gains, but...there's
substantial sticky, longer-term money basically (still) sat in
that long," she said.
After surging close to its $10,190 record level in February,
LME copper has since floated between $8,500-$9,300 as
the market lacks fresh bullish catalysts. But prices are still
expensive for some copper users.
"Wire rod producers were impacted the most...(Their
consumers) will not accept price increases that gives them the
burden of production costs," said CRU's analyst He Tianyu,
adding that cable makers might hold off purchase until
Yangshan copper premiums <SMM-CUYP-CN> dropped to $51.50 a
tonne, its lowest since Nov. 24, indicating slowing demand for
imported metal into China.
Meanwhile, LME inventories <MCUSTX-TOTAL> nearly doubled in
March and stockpiles in Shanghai Futures Exchange warehouses
<CU-STX-SGH> were near a seven-month high.
"We forecast substantial growth in copper supply from both
mines and refineries...in 2021," said Aurelia Britsch, head of
commodities at Fitch Solutions. Britsch expects growth from the
United States, Peru, Panama, the Democratic Republic of Congo
Users also switched to the relatively cheaper scrap.
"The substitution effect from scrap is likely to lead to a
lower total Chinese refined copper demand growth this year
compared to the growth in 2020," said Wood Mackenzie analyst Liu
Not everybody is pessimistic, however.
"The busy season of air conditioning in the second quarter
will hold prices at high level. In the third and fourth
quarters, prices may rise again if Western countries'
consumption pick up," said a China-based copper trader.
Tube makers enjoy stable revenue from fixed processing fees,
while rising costs are passed down to consumers, a tube producer
"Air conditioning plants raised their selling price to
offset the impact of raw material costs. I don't think the
copper price will fall too much," the tube maker said, pointing
to abundant money supply from massive global stimulus.
Meanwhile, demand from the Chinese appliance and automobile
sectors were better than expected, and consumption by
construction and renewable energy industries is seen solid for
the next few years, said Wood Mackenzie's Liu.
Still, as the strong demand season in China looks set to be
delayed, it becomes costly for copper bulls to keep rolling
Shanghai Dalu Futures, the Chinese broker that built up over
$1 billion in copper bullish bets in just a few days in
February, had by Friday cut its long positions in the April-July
contracts by 40% from Feb. 25 when prices hit near a decade
high, visible ShFE data showed.
Physical players believe prices should be closer to
$6,000-$7,000 while the speculative market eyes beyond $10,000,
said broker Neil Welsh at Britannia Global Markets, predicting
prices to fall before seeking support at around $8,660-$8,670.
"It essentially comes down to who will win between the
physical players and the speculative community."
(Reporting by Mai Nguyen; Editing by Toby Chopra)