Copper Prices Jump Higher on Supply Cuts, China Data
08 Setembro 2015 - 6:21PM
Dow Jones News
By Tatyana Shumsky And Ese Erheriene
Copper prices soared on Tuesday to their biggest daily
percentage gain in 2 1/2 years, as Glencore PLC's decision to shut
mines and an increase in Chinese imports prompted investors and
analysts to ratchet back estimates for global supplies.
The rally forced many investors to scramble to close out bearish
bets, which amplified the move, traders said. In recent weeks, bets
on falling copper prices have outstripped wagers on rising prices
due to the darkening outlook for growth in China, the world's
largest copper consumer and importer.
The Monday announcement by Glencore PLC, a Switzerland-based
commodity trader and miner, surprised market watchers who were
expecting the world would remain mired in a glut of the metal--used
in everything from iPhones to refrigerators--for the foreseeable
future. Glencore said it would shut two large copper mines in
Africa that analysts say account for 1% to 2% of world-wide copper
output.
While these cuts to supply aren't likely going to be big enough
to send copper futures on a sustained rally, Tuesday's sharp
reversal shows how vulnerable the copper market has become to
shifts in sentiment.
The benchmark U.S. copper price jumped 5.3% to a seven-week high
of $2.4340 a pound on the Comex division of the New York Mercantile
Exchange, the biggest one-day percentage gain since May 2013. U.S.
markets were closed on Monday for the Labor Day holiday.
The London Metal Exchange copper price rose 4.4% to $5,354 a
metric ton after gaining 0.6% on Monday.
Copper, along with many other metals, has tumbled in recent
months on the combination of a slowing Chinese economy and rising
production from miners who had expanded operations during the
commodities boom of the 2000s. Just two weeks ago, copper hit a
fresh six-year low amid worries about growing surpluses this year
and next.
"If Glencore delivers on everything they said, we're in a
balanced market situation and you are likely going to see higher
prices," said Bart Melek, senior commodities strategist with TD
Securities. "The market has been caught off guard by how sensitive
supply has become to price," Mr. Melek said, adding that the U.S.
price could reach $2.60 in coming weeks if there are further supply
cuts, or if demand improves.
Jessica Fung, metals strategist with BMO Capital Markets, said
Glencore's supply cut would substantially reduce the
545,000-metric-ton surplus she forecast for the copper market next
year. "The general view is that this is taking everyone's supply
numbers down," Ms. Fung said.
Tuesday's sharp turnaround in copper prices is the latest
example of investors getting upended on popular commodities bets
during a volatile time across financial markets. Money managers as
a group have been shorting, or betting against, copper for the past
13 weeks, according to the latest data from the U.S. Commodity
Futures Trading Commission. That made the market ripe for a swift
reversal, analysts and traders said.
A similar turnabout in the crude-oil market lifted prices 27%
over three days in August after lower U.S. production estimates and
expectations of supply cuts from oil-producing nations fueled a
buying spree. Oil prices have since pared some of those gains but
haven't hit new lows.
"The Glencore news was enough to spark some interest in copper,"
said Bob Haberkorn, a senior commodities broker with RJO Futures in
Chicago. "Copper has been extremely bearish over the last few
months, so you're seeing people getting out."
Copper prices also got a boost from data released Tuesday
showing China imported 350,000 metric tons of copper in August, up
4% from the year-ago period, according to analysts at Commerzbank.
Still, for the first eight months of the year, China's copper
imports have declined by 8%, according to Commerzbank.
While the data suggest healthy copper demand, "Chinese economic
growth is slowing, and that's bigger than Glencore cutting
production," said Stephen Briggs, base metal analyst at BNP
Paribas.
Other market watchers say that copper is likely to lose ground
again once the Federal Reserve raises interest rates, a move widely
expected before the end of 2015. Traders anticipate that the first
rate increase in nearly a decade will further bolster a
strengthening dollar, which will increase the cost of copper for
buyers who use other currencies to fund purchases.
With "a Fed rate hike looming, any rally is likely to be
short-lived," said Xao Fu, head of commodity markets strategy at
BOCI Global Commodities, a subsidiary of Bank of China Ltd.
Write to Tatyana Shumsky at tatyana.shumsky@wsj.com and Ese
Erheriene at ese.erheriene@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
September 08, 2015 17:06 ET (21:06 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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