There's nothing quite like a natural catastrophe and war in the Middle East to mess up your forecasts.
On Valentine's Day, copper enthusiasts got something much better than a bunch of roses: The red metal closed on Comex at an all-time high of $4.62 a pound. It promptly fell 11% over the following month and remains below the peak despite a recovery over the past week or so.
The proximate cause is the recent jump in oil prices. Since market panic after Lehman Brothers' collapse, copper has marched upward pretty much in lockstep with oil prices. Both have benefited from economic recovery and hedging against a weaker dollar. That relationship has broken down so far this year, however.
With oil prices now dancing to a geopolitical tune, they are seen as a threat to growth, not merely a symptom of it. That doesn't bode well for copper demand.
.
![[Copperherd]](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_vcyB0FtycBgRpwdqi4pdcC-u59pH46XDkjAvrrNDK2I2bSnoHUNW1eW_nA2CThOn-CvQI_kIzWur7JGgQ4UOk05uq4ZcNeoQiCfeQE0SlmctkxQzs1K_8Nq6TX6QeoxwTiS1sRbK5Dk3PeeVa3uc98lg=s0-d)
.
Rising inventories of copper add to this unease. Exchange stores are the flophouses of the metals world: resting places for tonnages with nowhere else to go. Since Dec. 1, London Metal Exchange inventories have risen by an average 1,301 metric tons a trading session.
Annualized, that would represent a surplus of about 325,000 metric tons, which undercuts the market's expectation that demand will outstrip supply by hundreds of thousands of tons this year. February trade data from China, which accounted for 39% of copper consumption last year, according to Barclays Capital, hasn't helped. Copper imports fell to their lowest level since November 2008. A slightly early Chinese New Year helps explain this, but there is also talk among traders of locals drawing down shadow inventories held off the exchanges. This makes sense, given Beijing's tightening monetary policy, making it more difficult to finance the cost of storing copper and also deflating expectations for future price increases.
China's next set of trade data will be critical in determining whether copper has merely paused for breath. There are several supportive elements in place. U.S. economic recovery continues, even if housing and employment remain subject to setbacks. Japan should require more copper for reconstruction efforts after its earthquake and tsunami. China's own plan to build millions of social housing units should mitigate weaker private-sector copper demand there.
But it is worth remembering that copper prices are now above the heights they reached in 2008's commodities frenzy. LME inventories today are almost five times the level they were back then. Moreover, with China tightening and U.S. and European interest rates having only one way to go, up, the high point of easy money is behind us already. And don't forget those oil prices. If an outright collapse in copper prices this year remains unlikely, further gains also look minimal, given structural constraints.
For investors in volatile metal markets, copper just doesn't look worth the risk.
On Valentine's Day, copper enthusiasts got something much better than a bunch of roses: The red metal closed on Comex at an all-time high of $4.62 a pound. It promptly fell 11% over the following month and remains below the peak despite a recovery over the past week or so.
The proximate cause is the recent jump in oil prices. Since market panic after Lehman Brothers' collapse, copper has marched upward pretty much in lockstep with oil prices. Both have benefited from economic recovery and hedging against a weaker dollar. That relationship has broken down so far this year, however.
With oil prices now dancing to a geopolitical tune, they are seen as a threat to growth, not merely a symptom of it. That doesn't bode well for copper demand.
.
Rising inventories of copper add to this unease. Exchange stores are the flophouses of the metals world: resting places for tonnages with nowhere else to go. Since Dec. 1, London Metal Exchange inventories have risen by an average 1,301 metric tons a trading session.
Annualized, that would represent a surplus of about 325,000 metric tons, which undercuts the market's expectation that demand will outstrip supply by hundreds of thousands of tons this year. February trade data from China, which accounted for 39% of copper consumption last year, according to Barclays Capital, hasn't helped. Copper imports fell to their lowest level since November 2008. A slightly early Chinese New Year helps explain this, but there is also talk among traders of locals drawing down shadow inventories held off the exchanges. This makes sense, given Beijing's tightening monetary policy, making it more difficult to finance the cost of storing copper and also deflating expectations for future price increases.
China's next set of trade data will be critical in determining whether copper has merely paused for breath. There are several supportive elements in place. U.S. economic recovery continues, even if housing and employment remain subject to setbacks. Japan should require more copper for reconstruction efforts after its earthquake and tsunami. China's own plan to build millions of social housing units should mitigate weaker private-sector copper demand there.
But it is worth remembering that copper prices are now above the heights they reached in 2008's commodities frenzy. LME inventories today are almost five times the level they were back then. Moreover, with China tightening and U.S. and European interest rates having only one way to go, up, the high point of easy money is behind us already. And don't forget those oil prices. If an outright collapse in copper prices this year remains unlikely, further gains also look minimal, given structural constraints.
For investors in volatile metal markets, copper just doesn't look worth the risk.
0 comments:
Publicar un comentario