Log in
Show password
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Dynamic quotes 


SummaryMost relevantAll NewsOther languagesMarketScreener Strategies

Reality check for copper bulls as Chinese demand growth slows

04/09/2021 | 07:22am EST

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 mid-April.

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 and Indonesia.

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 Zhifei.

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 said.

"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 their positions.

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)

© Reuters 2021
Stocks mentioned in the article
ChangeLast1st jan.
BELIEVE 3.79% 14.53 Real-time Quote.-14.01%
GOLD -0.34% 1815.97 Delayed Quote.1.11%
MSCI PERU (GDTR) -1.19% 5570.404 Real-time Quote.10.13%
SILVER -1.06% 23.326 Delayed Quote.2.49%
All news about LME COPPER CASH
02:00pComex Copper Settles 1.38% Higher at $4.5045 -- Data Talk
11:56aTeck Resources to Deploy Fleet of Caterpillar Zero-Emission Vehicles at Operations
01/25Comex Copper Settles 0.91% Higher at $4.4430 -- Data Talk
01/25Turquoise Hill Shares Jump After Agreement Clears Mongolia Mine Expansion
01/24Rio Tinto, Oyu Tolgoi Partners Reach Agreements to Advance Copper Project
01/24Comex Copper Settles 2.43% Lower at $4.4030 -- Data Talk
01/24Sibanye Stillwater Ends Planned Brazilian Mine Acquisitions
01/21Comex Copper Ends the Week 2.29% Higher at $4.5125 -- Data Talk
01/20BHP Shareholders Approve Unification Resolutions
01/20Rio Tinto Reviewing Serbia's Move to Revoke Lithium Project Licenses
More news
Duration : Period :
LME Copper Cash Technical Analysis Chart | MarketScreener
Full-screen chart