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(Kitco News) - Harbor Intelligence looks for copper prices to extend early-2012 gains over the next few months. "Global end-user demand gained traction across the board in January and preliminary data for February showed further improvement in China and Europe," Harbor says, also citing the decline in London Metal Exchange inventories in recent months. Meanwhile, supply concerns remain price supportive, analysts say. "Our best estimate is the market registered a deficit of 367,000 (metric) tons in 2011 vs. 341,000 tons in 2010. Inventories in terms of weeks of consumption continued to fall and should continue to decline, as we expect a 498,000 tons deficit for 2012." Harbor also points out that January-April is normally the seasonally strong period for copper, and funds have begun to bet on higher prices again. "Overall conditions suggest it is reasonable to expect the underlying upward trend to remain in place and see prices above $4.20 (per pound) before May ends," Harbor says.
By Allen Sykora of Kitco News; email@example.com
Feb. 24 (Bloomberg) -- Copper traders are the most bullish in two months on speculation that demand will strengthen from the U.S. to China at a time when stockpiles monitored by the world’s biggest metals exchange are at a 2 1/2 year low.
Fourteen of 29 analysts surveyed by Bloomberg expect the metal to gain next week and 10 were neutral, the highest proportion since Dec. 23. Inventories tracked by the London Metal Exchange are set for a fifth consecutive monthly drop and money managers have their biggest bet on rising prices since early August, Commodity Futures Trading Commission data show. Global equities and commodities climbed to at least six- month highs this week after euro-area finance ministers approved 130 billion euros ($173 billion) in aid for Greece to avert an economic collapse. China said Feb. 18 that it will cut banks’ reserve requirements to boost growth and U.S. indicators pointed last week to sustained economic expansion as Barclays Capital anticipates a third consecutive copper shortage this year.
“Copper is benefiting from very positive sentiment and from high levels of liquidity,” said Daniel Briesemann, an analyst at Commerzbank AG in Frankfurt. “It’s being driven by restrained supply and robust demand.”
The metal rose 11 percent to $8,410 a metric ton this year on the LME, the best start since 2008. The Standard & Poor’s GSCI gauge of 24 commodities climbed 9.8 percent and MSCI All- Country World Index of equities gained 11 percent. Treasuries lost 0.4 percent, a Bank of America Corp. index shows.
The People’s Bank of China said that the proportion of cash that lenders must set aside will fall half a percentage point from today, with Standard Chartered Plc and HSBC Holdings Plc predicting more reductions this year. The 0.4 percent increase in the Conference Board’s gauge of the U.S. outlook for the next three to six months on Feb. 17 followed a 0.5 percent increase in December, the strongest back-to-back gain in almost a year.
China consumes about 40 percent of the world’s copper and North America accounts for about 11 percent of demand. Refined production of the metal lagged usage by 119,000 tons in November, the most since March 2010, the International Copper Study Group said yesterday. Barclays estimates a shortage of 376,000 tons this year, and another shortfall in 2013.
The International Monetary Fund forecasts growth of 8.2 percent in China this year will drive a global expansion of 3.3 percent. Inventories of copper monitored by the LME slid 36 percent since October to 303,500 tons, the lowest level since September 2009, exchange data show.
While combined stockpiles tracked by bourses in London, New York and Shanghai slid 7.7 percent since October, Shanghai copper inventories more than doubled this year, the data show. China’s manufacturing may shrink for a fourth month in February, a Feb. 22 preliminary reading from HSBC and Markit
Economics showed, as exports are capped and the housing market cools.
Refined copper imports by the nation fell 18 percent in January from a record in December, the first decline in eight months, according to Bloomberg calculations based on Feb. 21 data from the General Administration of Customs. Imports may decrease this year, Jacob Shen, a trader at INTL FCStone Inc., said in an interview in Singapore yesterday.
Europe remains a risk to commodities used in construction and industry, even after ministers approved a second bailout and persuaded investors to provide more debt relief to Greece. Europe’s economy will shrink 0.3 percent this year, the European Commission said yesterday, abandoning a November forecast of 0.5 percent growth.
Copper benefited “from the temporary resolution of Greece’s financial woes,” said Mark Lewon, the president of Utah Metal Works Inc., a Salt Lake City-based company recycling industrial scrap. “I fully expect Greece to continue to have problems as government revenues fail to reach the levels expected due to the contraction in the economy.”
Goldman Sachs Group Inc. expects the metal to fall to $8,000 in three months before rebounding to $9,000 in a year, 7 percent above today’s price. The bank on Feb. 22 cut its prediction for commodity returns to 12 percent from 15 percent after prices rallied this year.
Hedge funds and other money managers are getting more bullish. Speculators raised their net-long position in copper by 20 percent to 14,817 futures and options in the week ended Feb. 14, the highest level since Aug. 2, CFTC data show. Wagers on higher prices more than tripled since mid-January.
Seventeen of 23 traders and analysts surveyed by Bloomberg expect gold to gain next week. Futures on the Comex in New York rose 14 percent to $1,781.20 an ounce this year after a 10 percent increase in 2011. Holdings in gold-backed exchange- traded products stand at 2,391.9 tons, less than 0.1 percent below the record in December, data compiled by Bloomberg show.
Eight of 11 people surveyed expect raw-sugar prices to increase next week. The commodity gained 6.6 percent this year to 24.84 cents a pound on ICE Futures U.S. in New York.
Ten of 21 people surveyed anticipate higher corn prices next week, while 15 of 22 said soybeans will climb. Corn fell 1 percent to $6.40 a bushel this year as soybeans gained 6.2 percent to $12.825 a bushel.
“We had a huge rally already in many commodities,” said Jesper Dannesboe, an analyst at Societe Generale SA in London. “In the near term I think a correction could come, or at least a consolidation, and then you should maybe try to buy on those dips. We’re moderately bullish.”
Gold survey results: Bullish: 17 Bearish: 5 Hold: 1 Copper survey results: Bullish: 14 Bearish: 5 Hold: 10 Corn survey results: Bullish: 10 Bearish: 3 Hold: 8 Soybean survey results: Bullish: 15 Bearish: 5 Hold: 2 Raw sugar survey results: Bullish: 8 Bearish: 3 Hold: 0 White sugar survey results: Bullish: 7 Bearish: 1 Hold: 3 White sugar premium results: Widen: 6 Narrow: 3 Neutral: 2
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