Copper Trade Most Bullish in Eight Months on China: Commodities

Copper analysts are the most bullish in eight months, joining hedge funds betting prices will gain on stronger demand from China, the biggest buyer.

Eighteen analysts surveyed by Bloomberg News expect prices to rise next week, seven are bearish and seven neutral, the largest proportion of bulls since March 8. Money managers and other speculators held a net-long position of 10,297 contracts on Oct. 29 after betting on lower prices as recently as September, the latest U.S. Commodity Futures Trading Commission data show. They were bearish from February to August.

Chinese manufacturing rose more than analysts estimated to an 18-month high in October and refined copper imports jumped to the most since February 2012 in September. Global stockpiles tracked by bourses in London, New York and Shanghai are the smallest in almost nine months, at a time when Europe is recovering from recession and the Federal Reserve is delaying a cut in stimulus to bolster economic growth.

“The strength in Chinese apparent demand has taken everyone by surprise,” said Gayle Berry, an analyst at Barclays Plc in London who has covered metals for more than a decade. “Chinese imports could stay quite strong.”

Copper fell 10 percent to $7,110 a metric ton on the London Metal Exchange this year. Prices rose 8.2 percent in the three months through September, the most in six quarters. The Standard & Poor’s GSCI gauge of 24 commodities declined 6.4 percent since the start of January and the MSCI All-Country World Index of equities gained 15 percent. The Bloomberg U.S. Treasury Bond Index lost 2 percent.

Metal Warehouses

Inventories in warehouses monitored by the three bourses dropped 29 percent since June to 666,087 tons, the lowest since February, according to data compiled by Bloomberg. Orders to withdraw copper from LME-tracked warehouses, known as canceled warrants, rose 14 percent since Oct. 18, indicating demand may be strengthening.

As global stockpiles fell, China increased imports in four of the five months through September. Refined copper shipments into the nation gained 32 percent from a month earlier in September, the most since 2010, customs data show. The country’s purchases may remain high in the next few months as looser bank policy makes it easier to obtain credit for trade, Barclays said in a Nov. 1 report.

Chinese Manufacturing

The Asian nation’s official Purchasing Managers’ Index rose to 51.4 last month from 51.1 in September, government data showed Nov. 1. That was more than the 51.2 median estimate in a Bloomberg News survey of analysts. China accounts for 43 percent of global copper consumption, Europe uses 17 percent and North America 11 percent, Barclays estimates.

China’s economy will expand 7.4 percent in 2014, economist estimates compiled by Bloomberg show. While that will be the lowest since 1990, it’s more than double U.S. growth, which will accelerate to 2.6 percent in 2014 from 1.6 percent this year. The euro area will expand next year after contracting this year and last, economists predict.

There are still risks the global recovery will be weaker than expected and the Fed said last week that the $85 billion monthly bond purchases will continue because it needs to see more evidence of sustained economic improvement.

There may be enough metal to meet increased demand, with Barclays predicting that supply will outpace consumption by 407,000 tons this quarter, compared with a 636,000-ton shortfall in the previous six months. The glut will total 193,000 tons in 2014, from a 63,000-ton deficit this year, the bank says.

Production Expanding

Production will rise 5 percent next year after producers from Mongolia to Indonesia to Chile responded to prices that surged in the past decade by adding new mines or expanding existing pits. Codelco, the world’s biggest producer, said last month it plans to invest $4 billion to $5 billion annually in the next five years to boost output.

Copper is trading 30 percent below the record $10,190 set in February 2011 and prices will fall to $6,600 in three months, Goldman Sachs Group Inc. forecasts.

Eight of 12 people surveyed expect raw sugar to fall next week and three were bullish. The commodity lost 7.8 percent to 17.98 cents a pound on ICE Futures U.S. in New York this year.

Twelve of 21 people surveyed anticipate lower corn prices and eight said the grain will rise, while nine of 21 said soybeans will gain and seven expect lower prices. Eleven predicted losses in wheat and nine were bullish.

Grain Prices

Corn fell 40 percent to $4.1925 a bushel this year in Chicago. Soybeans slid 10 percent to $12.69 a bushel, as wheat declined 16 percent to $6.5175 a bushel.

Sixteen of 32 surveyed said gold will advance next week, 11 were bearish and five neutral. The metal slumped 23 percent to $1,282.58 an ounce in London this year, set for the first annual decline in 13 years as some investors lost faith in the metal as a store of value.

The S&P GSCI gauge of raw materials fell to a four-month low yesterday, while global equities are trading 2.1 percent below a more than five-year high reached Oct. 30. Copper, aluminum, lead and nickel production will rise by at least 3.2 percent next year, Barclays estimates.

“A U.S. recovery and stabilization in China is going to provide some support,” said Gary Clark, a commodities strategist at Roubini Global Economics in London. “You’re getting these upward bumps on the back of macro data, but the underlying fundamental driver is rising supply. Commodities are moving towards a kind of fair value.”

Gold survey results: Bullish: 16 Bearish: 11 Hold: 5
Copper survey results: Bullish: 18 Bearish: 7 Hold: 7
Corn survey results: Bullish: 8 Bearish: 12 Hold: 1
Soybean survey results: Bullish: 9 Bearish: 7 Hold: 5
Wheat survey results: Bullish: 9 Bearish: 11 Hold: 1
Raw sugar survey results: Bullish: 3 Bearish: 8 Hold: 1
White sugar survey results: Bullish: 4 Bearish: 6 Hold: 2
White sugar premium results: Widen: 5 Narrow: 4 Neutral: 3