Commodities investors who cut bullish bets on raw materials for the first time in five weeks shouldn’t be too bearish as demand isn’t slowing fast enough to make up for disruptions in supplies, Barclays Capital said.
Demand for copper will rise 3.9 percent this year, outpacing global production, resulting in a shortage of 639,000 metric tons, Barclays said on Aug. 24. Global corn stockpiles in the 2011-12 marketing year will fall to the lowest in five years, U.S. Department of Agriculture data show. Fund managers cut their net-long positions on 18 commodities by 5.2 percent in the week ended Sept. 13, U.S. government data show.
“The demand picture is still fairly buoyant,” Kevin Norrish, managing director of commodities research at Barclays, said at a meeting in London today. “Demand is slowing down but it’s not slowing down fast enough to alleviate pressures on the supply side.”
Investors cut long positions on speculation that demand for food, fuel and metals will decline as the European debt crisis worsens. The Standard & Poor’s GSCI Index of 24 commodities has dropped 4.5 percent in the past month as the Federal Reserve’s outlook for “significant downside risks” for the U.S. economy added to signs of slowing growth.
China’s manufacturing may shrink for a third month in September, a preliminary index of purchasing managers from HSBC Holdings Plc and Markit Economics showed today.
Commodities will still be buoyed by strong supply-and-demand fundamentals and if the European debt crisis is contained, prices for raw materials may increase, Norrish said.
“The demand picture still looks reasonably good and looking forward there are some promising signs as well,” Norrish said. “We expect emerging markets to dominate growth in the next six months.”
Chinese demand for base metals will increase and copper and aluminum will rise at a “double digit growth rate” in the next few years, Ren Weifeng, head of macro economy teams at Beijing Antaike Information Development Co., said yesterday. Lead and zinc growth rates will slow to single digits, he said.
Corn imports into China will total a record 2 million metric tons, up 54 percent from the prior year, USDA data show. Soybean purchases by the Asian country also will reach a record, totaling 56.5 million tons, according to the USDA.
“This is not the time to be going short commodities,” Norrish said. “That doesn’t look like the sensible thing to do given the supply issues.”