Copper Traders Bullish as Hedge Funds Bet on Gains: Commodities

Photographer: Krisztian Bocsi/Bloomberg

Global copper inventories tracked by bourses in London, New York and Shanghai slid 45 percent since June to 511,729 tons, the least since December 2012. Refined copper imports by China, the biggest consumer, climbed 12 percent to 328,907 tons last month, 80 percent more than in April, customs data show. Close

Global copper inventories tracked by bourses in London, New York and Shanghai slid 45... Read More

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Photographer: Krisztian Bocsi/Bloomberg

Global copper inventories tracked by bourses in London, New York and Shanghai slid 45 percent since June to 511,729 tons, the least since December 2012. Refined copper imports by China, the biggest consumer, climbed 12 percent to 328,907 tons last month, 80 percent more than in April, customs data show.

Copper analysts are the most bullish in three weeks after manufacturing expanded from the U.S. to Europe and hedge funds bet on higher prices for the first time since November.

Fourteen analysts surveyed by Bloomberg News expect prices to gain this week, four are bearish and six neutral. The metal reached a four-month high of $7,415.50 a metric ton on Dec. 27. Hedge funds and other large speculators are holding their biggest bullish bet since February, U.S. Commodity Futures Trading Commission data show.

While the metal has been in a bear market since April, prices rallied 12 percent from this year’s low in June as stockpiles slid to a 12-month low and Barclays Plc cut its forecast for next year’s supply glut. Global manufacturing climbed in November to the strongest since April 2011 and economists surveyed by Bloomberg expect world economic expansion to accelerate next year.

“People are getting more bullish on economies,” said Donald Selkin, who helps manage about $3 billion as the New York-based chief market strategist at National Securities Corp. “I would bet that if one has to invest in commodities one should look at those commodities that are used in construction and building. Copper has definitely found a bottom.”

Copper fell 7 percent to $7,380 on the London Metal Exchange this year. The metal averaged $7,352, poised for the fourth-highest annual level on record and four times the price a decade ago. The Standard & Poor’s GSCI gauge of 24 commodities declined 1.3 percent and the MSCI All-Country World Index of equities gained 20 percent. The Bloomberg U.S. Treasury Bond Index lost 3.3 percent.

Manufacturing Increases

A global purchasing managers index from JPMorgan Chase & Co. and Markit Economics gained in November for a fifth month. U.S. manufacturing rose in November at the fastest pace in more than two years and euro-area factory output grew quicker than economists forecast in December. The global economy will expand 2.8 percent in 2014 from 2 percent this year, according to economist estimates compiled by Bloomberg.

Global copper inventories tracked by bourses in London, New York and Shanghai slid 46 percent since June to 508,248 tons, the least since December 2012. Refined copper imports by China, the biggest consumer, climbed 12 percent to 328,907 tons last month, 80 percent more than in April, customs data show.

Available Supply

Immediate-delivery copper settled $30 higher than the contract for delivery in three months on Dec. 16, the most since May 2012. That reflects concern that available supplies are diminishing. Aurubis AG, the second-largest refined copper producer, said Dec. 23 that refined metal will remain in short supply in the next several months.

Speculators held a net-long position of 20,688 contracts in the latest week, compared with a bearish wager of 24,067 contracts in mid-November. They’ve bet on lower prices for a total of 30 weeks this year. Goldman Sachs Group Inc. sees the metal slipping to $6,600 in three months.

Barclays, which forecast in September that supply would beat demand this year, now expects a shortage and cut its estimate for the glut in 2014 by 34 percent from its October outlook. Next year’s surplus will total 127,000 tons as mine starts and expansions from Peru to Mongolia boost production, according to the bank. Codelco, the biggest producer, said in October it plans to invest $4 billion to $5 billion annually in the next five years to increase output.

China’s Growth

China’s economy slowed every year since 2011. Growth in the Asian nation will drop to 7.5 percent next year, the least since 1990, according to economist estimates compiled by Bloomberg.

While Barclays says commodity-fund investments fell by a record $88 billion to $332 billion in the first 11 months, analysts, traders and investors surveyed by Bloomberg earlier this month predicted metals and crop prices will rebound. Copper will rise to as high as $7,836 in 2014, the median of 35 estimates showed.

Five of nine people surveyed last week expect raw sugar to gain this week and two are bearish. The commodity lost 15 percent to 16.49 cents a pound on ICE Futures U.S. in New York this year.

Eight of 18 people surveyed anticipate higher corn prices and six said the grain will fall. Ten of 18 said soybeans will decline and five expect higher prices. Seven predicted increases in wheat and six were bearish.

Crop Prices

Corn fell 39 percent to $4.255 a bushel this year in Chicago. Soybeans slid 7.4 percent to $13.055 a bushel, as wheat declined 22 percent to $6.0575 a bushel.

Nine of 21 surveyed said gold will fall this week, eight were bullish and four neutral. The metal slumped 28 percent to $1,203.26 an ounce in London this year, set for the first annual decline in 13 years as some investors lost faith in bullion as a store of value. Futures closed at $1,193.60 on Dec. 19, the lowest since August 2010, after the Federal Reserve said it will reduce stimulus.

Global equities reached the highest since December 2007 last week and International Monetary Fund Managing Director Christine Lagarde said Dec. 22 the agency is raising its outlook for the U.S. economy. While the S&P gauge of raw materials rose 5.5 percent since early November, the commodities index is still trading 16 percent below its April 2011 level.

“The five-six years of high commodity prices and new supplies have brought prices down,” said Michael Shaoul, the chief executive officer of Marketfield Asset Management LLC, which oversees about $17 billion. “The developed world is in an exciting period of growth. The demand for industrial metals could run ahead of expectations.”

Gold survey results: Bullish: 8 Bearish: 9 Hold: 4
Copper survey results: Bullish: 14 Bearish: 4 Hold: 6
Corn survey results: Bullish: 8 Bearish: 6 Hold: 4
Soybean survey results: Bullish: 5 Bearish: 10 Hold: 3
Wheat survey results: Bullish: 7 Bearish: 6 Hold: 4
Raw sugar survey results: Bullish: 5 Bearish: 2 Hold: 2
White sugar survey results: Bullish: 5 Bearish: 2 Hold: 2
White sugar premium results: Widen: 3 Narrow: 0 Neutral: 5

To contact the reporters on this story: Debarati Roy in New York at droy5@bloomberg.net; Nicholas Larkin in London at nlarkin1@bloomberg.net

To contact the editors responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net; Millie Munshi at mmunshi@bloomberg.net

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