Weak Demand, Excess Supply Depresses Copper
Buyers probably will continue to see lower copper prices in coming weeks, says the CRU Group of London in a research note to clients. The market researchers see continued weak global demand, insufficient production cutbacks and bearish sentiment among investment fund managers. Bloomberg agrees that “the slumping global economy (has) slashed metal demand and led to surging warehouse inventories,” which are key indicators of weak commodity pricing.
Copper for immediate delivery this month on the London Metal Exchange (LME) is $1.46/lb and for two-month delivery on the New York Commodity Exchange is $1.47. That’s higher than the $1.39 world price average on the LME in December but lower than the $1.69 price average for November. The world price for copper averaged $3.15/lb last year but the consensus forecast of 14 analysts polled by Purchasing.com is $1.59 for 2009.
Buyers polled by Purchasing.com The CRU analysis says that “the drop in industrial output points to a sharp decline in copper demand this year (and) lower prices through the first half.” Other analysts agree: Inventories are “no doubt weighing on sentiment,” Edward Meir, an analyst at MF Global Ltd. in Darien, Conn. says in a note to clients that, “for all practical purposes, we still seem to be firmly mired in recessionary conditions (so) we expect copper prices to fade.” The Bloomberg story quotes Logic Advisors partner William O’Neill in Upper Saddle River, N.J., as saying “the economy remains quite weak and copper will continue to struggle.” in January remain cautious in buying copper, with only 9% planning to make buys in the near future.
Analysts have pinned second-half copper-demand improvement on government efforts worldwide to stabilize the financial system and stimulate economic growth. Some other economists, however, don’t see improvement in copper demand until housing, nonresidential and infrastructure construction show sustained pickup in 2010.
Platts Metals Daily subscription newsletter says that “so far, the producer response to the collapse in the price of copper had been minimal.” Of the major mining companies, only Freeport McMoRan and BHP Billiton have announced major mining and smelting cutbacks. “Production cuts would have to be larger for the market to be brought back into balance (and) to provide a floor to the copper price,” CRU says.
Copper for immediate delivery this month on the London Metal Exchange (LME) is $1.46/lb and for two-month delivery on the New York Commodity Exchange is $1.47. That’s higher than the $1.39 world price average on the LME in December but lower than the $1.69 price average for November. The world price for copper averaged $3.15/lb last year but the consensus forecast of 14 analysts polled by Purchasing.com is $1.59 for 2009.
Buyers polled by Purchasing.com The CRU analysis says that “the drop in industrial output points to a sharp decline in copper demand this year (and) lower prices through the first half.” Other analysts agree: Inventories are “no doubt weighing on sentiment,” Edward Meir, an analyst at MF Global Ltd. in Darien, Conn. says in a note to clients that, “for all practical purposes, we still seem to be firmly mired in recessionary conditions (so) we expect copper prices to fade.” The Bloomberg story quotes Logic Advisors partner William O’Neill in Upper Saddle River, N.J., as saying “the economy remains quite weak and copper will continue to struggle.” in January remain cautious in buying copper, with only 9% planning to make buys in the near future.
Analysts have pinned second-half copper-demand improvement on government efforts worldwide to stabilize the financial system and stimulate economic growth. Some other economists, however, don’t see improvement in copper demand until housing, nonresidential and infrastructure construction show sustained pickup in 2010.
Platts Metals Daily subscription newsletter says that “so far, the producer response to the collapse in the price of copper had been minimal.” Of the major mining companies, only Freeport McMoRan and BHP Billiton have announced major mining and smelting cutbacks. “Production cuts would have to be larger for the market to be brought back into balance (and) to provide a floor to the copper price,” CRU says.
source: www.purchasing.com
