Market Commentary

Copper Traders Turn Bullish First Time in 6 Weeks

SOURCE: [Bloomberg] - Copper traders are bullish for the first time in six weeks on mounting confidence that demand will accelerate in line with economies at a time when mining companies are already failing to keep up with consumption.

Eleven of 29 analysts surveyed by Bloomberg expect the metal to climb next week and 10 were neutral. Rio Tinto Group (RIO), based in London, said April 17 that its first-quarter copper output slid 18 percent because the ore mined contained less metal. Codelco, the largest copper producer, said the following day that it sees no weakening in Chinese buying. Barclays Capital is predicting a third consecutive year of shortages.

The International Monetary Fund raised its global growth forecast for the first time in more than a year on April 17. Industrial production in China, the biggest copper consumer, expanded 11.9 percent in March, exceeding economists’ forecasts, the government said April 13. The Bank of Japan is “committed” to monetary easing to shore up the economy, Governor Masaaki Shirakawa said April 18.

“You’re beginning to see an improvement in global growth,” said Nic Brown, the head of research at Natixis Commodity Markets Ltd. in London. “China has a slightly slower growth rate, but the economy itself is growing so rapidly that it represents a very substantial increase in demand. You’re going to have a very substantial copper deficit this year.”

Copper rose 7 percent to $8,134.25 a metric ton this year on the London Metal Exchange, rebounding from a 21 percent decline in 2011. The Standard & Poor’s GSCI gauge of 24 commodities climbed 5.1 percent and the MSCI All-Country World Index of equities advanced 8.6 percent. Treasuries gained less than 0.1 percent, a Bank of America Corp. index shows.

More Stimulus

Central banks are keeping open options for further stimulus to sustain growth that spurred investors to add about $4.65 trillion to the value of global equities this year. Federal Reserve policy makers Janet Yellen and William C. Dudley endorsed the view last week that the Fed should hold its target rate for overnight loans between banks near zero through 2014. North America uses about 11 percent of the world’s copper, China 40 percent and Japan 5 percent, according to Barclays.

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