10 Apr 2013
Growing negative market sentiment, along with rising warehouse stocks, mine supply and weakening demand, could weigh on copper prices, said a metals consultancy Tuesday.
Copper prices are weaker so far in 2013, and if selling pressure intensifies, Thomson Reuters GFMS said prices could fall to $6,500 a metric ton. However, the firm said it believes the red metal could spend most of the year within its recent broad trading range.
“The continued uncertainty surrounding the eurozone has recently been exacerbated by the eruption of the Cypriot debt and banking crisis. This, together with ongoing caution regarding the economic outlooks for both the United States and China, has helped to keep sentiment in the copper (and broader commodities) market on the back foot,” said Sanjay Saraf, head of base metals research and forecasts at Thomson Reuters GFMS. “Adding to this, on the fundamental front, has been a rise in global exchange stocks and in our estimate of copper inventories in Chinese bonded warehouses in 2012.”
Global mine production grew by 4% to 16.669 million metric tons in 2012 following two years of minimal growth, making 2012 output the highest annual increase since 2004, Saraf said. Also in 2012, world refined copper supply rose by 2% to 20.059 million tons, although this is a decline in the rate of growth versus the past two years.
Global consumption was up less than 1% year-over-year, to 19.845 million tons in 2012. The firm cited a sharp slowdown in the rate of Chinese demand expansion, with growth halving to 4% last year. Saraf said the economic problems in the European Union were also a major area of weakness.
Thomson Reuters GFMS said world copper consumption within the building construction sector fell 1% in 2012. The electrical and electronic products sector, which is the largest end-use segment, saw a 2% increase. This came from growth in demand from the power utilities sector in the emerging economies, and in particular China, they said. The consumer and general products sector saw consumption sliding 3% and was the worst-performing end-use segment in 2012, they said.
The lackluster demand and rising supply lead to the copper market being in a surplus of 214,000 tons last year, the firm said. They said there was an “implied increase” in off-exchange warehouse stocks, with most of those in China; this build has limited price growth for 2013.
The firm said while copper prices are having an impact on investors, Thomson Reuters GFMS also sees “a more risk-averse stance being adopted by many commodity and macro funds that trade copper, as well as the culling of proprietary trading at major investment banks, as extenuating factors.”
The investment activity will be an important driver of short-term market movements, they said, with current sentiment now negative. A stronger U.S. dollar has lent pressure, but the firm also noted the record high net-short position held by speculators in copper, according to the Commodity Futures Trading Commission. The position “exceeds that built at the height of the post-Lehman financial crisis, in early 2009, when the copper price was trading around $3,000/ton,” they added.
The global average cash cost rose 14% in 2012, to $3,527 a ton, as costs rose across the board. The marginal cost was measured at $5,512. This implies a 31% operating margin from the 2012 copper price of $7,950 a ton, although the firm said this is closing quickly.
“The economics of the industry do not look quite as attractive as they did perhaps only two years ago. This is already apparent from the decisions taken by some major producers this year in revising plans for new development projects,” they said.
Courtesy ; kitco News
Crude Oil futures are trading lower during Wednesday’s Asian session after the U.S. Energy Information Administration pared its 2013 and 2014 global demand forecasts.
On the New York Mercantile Exchange, light, sweet crude futures for May delivery fell 0.23% to USD93.98 per barrel in Asian trading Wednesday after settling up 0.91% at USD94.21 a barrel on Tuesday in the U.S.
EIA said global oil use will rise by 1 million barrels per day 90 million barrels per day this year, but that is 140,000 barrels a day below EIA’s prior forecast. EIA sees 2014 oil demand rising by 1.3 million barrels per day, but that is 200,000 barrels a day less than the EIA's March forecast.
The group said Chinese Crudeoil demand will rise by 450,000 barrels a day this year, to 10.68 million barrels a day this year following demand growth of 380,000 barrels a day in 2012. China is the second-largest oil consumer in the world behind the U.S.
EIA said China’s oil demand will jump 510,000 a barrels a day to 11.19 million barrels a day next year. Following a 16-year low seen last year, EIA sees U.S. consumption rising slightly to 18.62 million barrels per day in 2013.
In 2014, EIA sees countries outside the Organization for Economic Cooperation and Development topping non-OECD demand for the first time.
Production by countries outside the Organization of Petroleum Exporting Countries is expected to increase by 1.06 million barrels a day this year and by 1.58 million barrels a day in 2014, according to EIA. OPEC’s 12 member nations account for about 40 percent of global oil output.
Elsewhere, Brent crude for May delivery rose 0.05% to USD106.34 per barrel on the ICE Futures Exchange.
Courtesy : Investing.com
Gold futures are trading slightly lower in the early part of Wednesday’s Asian session as traders look to lock in profits following a decent performance by the yellow metal during Tuesday’s U.S. session.
On the Comex division of the New York Mercantile Exchange, gold futures for June delivery fell 0.03% to USD1,586.25 per troy ounce in Asian trading Wednesday after settling up 0.89% at USD1,586.55 a troy ounce in U.S. trading on Tuesday.
Gold futures were likely to test support USD1,567.15 a troy ounce, Monday's low, and resistance at USD1,604.25, last Tuesday's high.
In a research note out on Tuesday, Bank of America Merrill Lynch said gold should find support in the USD1,525-USD1,550 per ounce area and that a jump to USD1,625-USD1,630 per ounce would confirm a successful test of the aforementioned support. The analysts added that a return to that area could set gold up for a run back to USD1,800 per ounce.
Elsewhere, investors in Japan are selling gold at a noteworthy clip because gold there has surged nearly 5% in the past week because of the weaker yen. Gold traded at the Tokyo Commodity Exchange has gained nearly 7% since the Bank of Japan announced new monetary easing measures last week.
In the U.S., the state of Arizona is closer to approving the use of gold and silver as legal tender after the Republican-led state House of Representatives voted in favor of a proposal. If Arizona’s governor signs the bill into law, the state would be the second after Utah to recognize gold and silver as legal tender.
Meanwhile, Comex silver for May delivery is up 0.09% at USD27.905 while copper for May delivery is higher by 0.10% at USD3.437.
Courtesy : Investing.com