Copper traders are bearish for the first time in 10 weeks after stockpiles surged, at a time when hedge funds are making their biggest bullish bet in two months because of mounting confidence economic growth will accelerate.
Fourteen traders and analysts surveyed by Bloomberg said they expect prices to decline next week, seven were bullish and six were neutral. That’s the highest proportion of bears since Oct. 12. Stockpiles monitored by the London Metal Exchange rose 15 percent this week to the highest since February. Supply will exceed demand by the widest margin in a decade next year, the International Copper Study Group estimates.
Hedge funds turned bullish this month, after betting on lower prices since Nov. 13, as data from the U.S. to China signaled economies are strengthening and central banks pledged more action. The World Bank said Dec. 19 that East Asia’s emerging nations will accelerate next year as China rebounds from seven consecutive quarters of slowing growth. The country accounts for about 40 percent of copper demand.
“The fact that LME stocks have surged has been unnerving a few,” said Ole Hansen, the head of commodity strategy at Saxo Bank A/S in Copenhagen who has traded raw materials for more than a decade. “China is still the main driver with regard to industrial metals. The outlook for copper in 2013 looks reasonably good.”
Copper rose 2.5 percent to $7,792 a metric ton on the LME this year and averaged $7,952, headed for a lower annual average for the first time since 2009. The Standard & Poor’s GSCI gauge of 24 commodities fell 0.7 percent and the MSCI All-Country World Index (MXWD) of equities gained 14 percent. Treasuries returned 1.8 percent, a Bank of America Corp. index shows.
Supply will exceed demand by 458,000 tons in 2013, as refined output climbs 6 percent and consumption 1.5 percent, the Lisbon-based ICSG said Oct. 12. Refined copper output will grow 3.1 percent this year, compared with a 1.9 percent increase in demand, Standard Bank Plc estimates.
Metal for delivery in three months, the LME’s benchmark contract, cost $28.75 a ton more than immediate supply on Dec. 18, the most since July 2010. The market structure, known as contango, typically reflects declining concern among traders about near-term supply.
Hedge funds and other large speculators raised their net- long position by 64 percent to 22,123 contracts in the week ended Dec. 11, the highest level since Oct. 16, U.S. Commodity Futures Trading Commission data show. While LME stockpiles reached 312,4200 tons today, that’s still 16 percent lower than a year ago and imports by China rebounded in November from the lowest level in 15 months.
China’s economic growth will accelerate to 8.4 percent in 2013 from 7.9 percent this year, the World Bank said Dec. 19. U.S. industrial production jumped the most in two years in November and the number of building permits rose to a four-year high. The 17-nation euro area’s economy will start growing again in the third quarter, according to the mean of 30 economist estimates compiled by Bloomberg.
The Bank of Japan expanded its asset-purchase program for the third time in four months yesterday, boosting the asset- purchase fund by 15 percent to 76 trillion yen ($906 billion). The Federal Reserve added to its stimulus program last week by making another $45 billion of monthly Treasury purchases.
U.S. leaders have yet to reach an agreement on how to avoid more than $600 billion of tax increases and spending cuts that start automatically next month. The Congressional Budget Office says the lack of an accord on the so-called fiscal cliff risks sending the world’s biggest economy back into a recession.
In other commodities, 14 of 28 traders and analysts surveyed by Bloomberg said gold would climb next week and nine were bearish. Bullion rose 5.6 percent to $1,651.51 an ounce in London since the start of January, heading for a 12th annual gain. Holdings in gold-backed exchange-traded products reached a record 2,632.5 tons on Dec. 20, data compiled by Bloomberg show.
Soybeans traders turned bearish for the first time since Oct. 12 and wheat analysts also expect prices to retreat. Thirteen out of 27 predicted a decline in soybeans and 12 a gain, while 12 of 27 forecast lower wheat and nine anticipated an advance. Wheat rallied 21 percent to $7.93 a bushel this year as soybeans advanced 17 percent to $14.1725 a bushel.
Corn traders are the least bullish since Sept. 21, with 13 of 29 expecting higher prices and 12 a decline. Corn rose 8.5 percent to $7.025 a bushel this year.
Five of 13 surveyed expected raw sugar to drop next week and four predicted a gain. The commodity slid 18 percent to 19.21 cents a pound on ICE Futures U.S. in New York this year, the second-worst performer after arabica coffee in the S&P GSCI.
Hedge funds cut bullish bets across 18 U.S. futures and options by the most in a month last week as raw materials head for the first annual decline since 2008, the CFTC data show.
“As we go into 2013, we will hopefully have the fiscal cliff resolved and we will look forward to better economic growth out of China,” said Robin Bhar, an analyst at Societe Generale SA in London. “Growth in China and the U.S. could make people a lot more bullish than they are at the moment.”
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