Investor Sentiments Remain Low for Copper


Submitted by Mai Bantog as part of our contributors program.

Investor Sentiments Remain Low for Copper

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The latest economic data from China took its toll on copper futures, as its price fluctuated within a small range last week due to downbeat trading sentiment. The base metal even edged lower on Monday as traders figure out whether a surprise rate cut in China would translate into an increased demand for copper.

According to Ecns.cn, The three-month copper contract from the London Metal Exchange (LME) closed at $6,700.50 per ton last Friday, up by 0.64 percent from Thursday. Still, copper prices are relatively lower by 0.08 percent for the whole week.

On the other hand, copper did well on the Shanghai Futures Exchange (SHFE) last week with a 0.89 percent price increase on a weekly basis. However, its total trading volume was limited to 1.09 million lots—6.84 percent down compared to the previous week’s 1.17 million lots.

The sufficiency of copper supply last Friday was due to the improving LME and SHFE copper price ratio that allowed inflows of imported copper, according to Shanghai Metal Markets. Additionally, warehouse warrants continued to flow to the market, resulting to narrow spot premiums during the afternoon trading session. Cargo holders rushed to sell ahead of the weekend to generate cash, driving spot premiums down.

Investor confidence is currently low on copper due to weaker-than-expected HSBC manufacturing and industrial data. According to the HSBC, copper’s purchasing managers’ index—a preliminary indicator of manufacturing activity—fell to a six-month low this month at 50.0, down from 50.4 last October. This was even worse than analysts’ expectation of 50.2. A reading above 50 indicates expansion.

The dollar also reached a five-year high against a basket on 10 currencies as investors speculate that the Federal Reserve is going to increase US interest rates. “The Chinese numbers are adding pressure on the base metals complex. The dollar’s strength continues to act against commodities,” said Mike Dragosits from TD Securities to Metal Guru.

Furthermore, copper output in China is also expected to reach 6.80 million tons in 2014, Shanghai Metals Market (SMM) predicts. According to SMM’s copper analyst, “Copper production growth is estimated at around 4 percent this year to reach 6.80 million tons.” Reasons behind this include production cuts at Chinese smelters, smaller than scheduled commissioning of new capacities, and limited supply of crude copper and anode copper. Copper output is expected to increase on 2015 by 7.55 million tons, as it is the only base metal forecasted to be in surplus.

Despite the expected supply of copper, more copper explorations are underway, including the Kun-Manie Project managed by Amur Minerals Corporation (AIM: AMC) and divided into five drilled deposits. Though the main product of the project is 830,000 tons of nickel sulphide, the site also contains a huge amount of copper measuring around 178,400 tons. According to the company’s interim financial report in June 2014, the average grade per ton for copper is 0.15 percent. The area remains highly prospective with the limits of mineralization not yet established.

The shares of Amur Minerals closed at 6.60 last Friday, 0.46 points up from Thursday’s trading day.