Copper traders are the most bearish in six weeks on concern demand will slow in China, Europe and the U.S. at a time when hedge funds are betting on lower prices.
Thirteen analysts surveyed by Bloomberg said they expect prices to drop next week and nine were bullish. A further six were neutral, making the proportion of bears the highest since June 1. Speculators have been wagering on a price drop since May and held a net-short position of 1,749 contacts on July 3, U.S. Commodity Futures Trading Commission data show.
More than $1.5 trillion has been wiped from the value of global equities since early July amid concern growth is stalling. Federal Reserve policy makers said at their June meeting that strains from Europe’s debt crisis may spill over into the U.S. China’s growth slowed to a three-year low last quarter and copper imports to the country, which accounts for about 40 percent of demand, slid to a 10-month low in June.
“People are quite concerned about slowing growth in China which leads to slowing demand for industrial metals,” said Daniel Briesemann, an analyst at Commerzbank AG in Frankfurt. “We should know about almost all the risks in Europe for now, but it’s definitely not positive. At the moment everything is sentiment driven.”
Copper rose 1 percent to $7,674.50 a metric ton this year on the London Metal Exchange after slumping 21 percent last year. The MSCI All-Country World Index (MXWD) of equities gained 2.1 percent since the start of January and the Standard & Poor’s GSCI gauge of 24 commodities slid 3.8 percent. Treasuries returned 2.6 percent, a Bank of America Corp. index shows.
Analysts at Credit Suisse Group AG, JPMorgan Chase & Co. and Barclays Plc reduced their forecasts for 2012 copper prices this week. “More moderate” copper demand means supply shortages will be needed for significant price gains, Barclays wrote in a report yesterday. The International Monetary Fund will cut its estimate for global growth of 3.5 percent this year, Managing Director Christine Lagarde said July 6.
Chinese imports of refined copper, alloy and products slid 18 percent to 346,223 tons in June from a month earlier and were the least since August, General Administration of Customs data show. Slower demand would help contribute to a 54,000-ton surplus this quarter that Barclays estimates will climb to 139,000 tons in the final three months of this year.
European investor confidence dropped to a three-year low in July, data from Germany’s Sentix research institute showed July 9. PSA Peugeot Citroen, Europe’s second-biggest carmaker, will close the first auto factory in France in 30 years as sales decline. The average midsize car uses about 50 pounds of copper, according to the International Copper Study Group.
Lower prices may spur buying. Stockpiles monitored by the LME declined in eight of the nine days through yesterday and are down 32 percent this year at 251,675 tons, bourse data show. Inventories in Comex warehouses in the U.S. plunged 43 percent this year and are at the lowest in more than three years.
While Barclays estimates metal held in Chinese bonded warehouses that are exempt from a value-added tax and import duties peaked at more than 600,000 tons in April, Goldman Sachs Group Inc. said in a July 9 report that the nation’s copper usage will grow about 5 percent there this year and predicted that prices will rally to $9,000 in 12 months.
Copper tripled as the Fed bought $2.3 trillion of debt in two rounds of so-called quantitative easing that ended in June 2011. Two participants supported additional bond purchases, or quantitative easing, while two others said only a further deterioration in the economy would warrant them, according to minutes of the Federal Open Market Committee’s June 19-20 meeting released July 11. Policy makers are scheduled to announce a rate decision Aug. 1.
In other commodities, 13 of 28 traders and analysts surveyed by Bloomberg said gold would climb next week and 10 were bearish. Futures on the Comex exchange in New York rose 1.1 percent to $1,584.60 an ounce since the start of January, after gaining the past 11 years. Prices reached an all-time high of $1,923.70 in September.
Bullion will set a new record by the end of this year as the global economy slows from the weight of too much debt, Eric Sprott, the founder and chairman of Canadian fund manager Sprott Inc., said in a July 9 interview in Toronto. Holdings in gold- backed exchange-traded products climbed to a record 2,413.6 tons on July 5, data compiled by Bloomberg show.
Seven of 13 people surveyed expect raw sugar to advance next week and three predicted declines. The sweetener slipped 2.5 percent to 22.72 cents a pound on ICE Futures U.S. in New York this year.
Fifteen of 26 people surveyed anticipate higher corn prices next week and 10 said the grain will decline, while 14 of 27 said soybeans will rally and 12 expect lower prices. Corn rose 15 percent to $7.4575 a bushel this year as soybeans advanced 29 percent to $15.5275 a bushel in Chicago.
The S&P GSCI gauge of commodities slid more than 20 percent from its February peak through June 21, entering a so-called bear market. China reduced interest rates last week for the second time in a month, the European Central Bank cut rates to a record-low and the Bank of England restarted bond purchases two months after halting its expansion of stimulus.
“Economic releases continue to disappoint,” said Filip Petersson, an analyst at SEB AB in Stockholm. “The Fed still holds the door open to QE3, but they still think that it is not bad enough. I really have a hard time seeing a commodity rally from this point without interventions.”
Gold survey results: Bullish: 13 Bearish: 10 Hold: 5 Copper survey results: Bullish: 9 Bearish: 13 Hold: 6 Corn survey results: Bullish: 15 Bearish: 10 Hold: 1 Soybean survey results: Bullish: 14 Bearish: 12 Hold: 1 Raw sugar survey results: Bullish: 7 Bearish: 3 Hold: 3 White sugar survey results: Bullish: 6 Bearish: 5 Hold: 2 White sugar premium results: Widen: 3 Narrow: 4 Neutral: 6
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