The copper prices declined further, despite sharp rise in Chinese demand. Meantime, analysts from agencies including Barclays and Goldman Sachs see fair chances of the commodity prices entering a long-term bear market. Incidentally, copper prices have remained essentially flat when compared with the beginning of the year. The prices had registered a decline of over 25% in 2015.
The Chinese customs data indicate that the country’s total imports of unwrought copper and copper products improved slightly over the year in July this year. The imports totaled 360,000 tons during the month. Meantime, analysts from Goldman Sachs and Barclays warned that copper is most likely to see further downside. However, Commerzbank shared a not-too-bearish view on the metal.
According to Goldman Sachs, the copper prices are likely to decline to $4,000 per mt over the next one year period, mainly on account of increased mine supply from across the world. This translates to 17% drop in prices over the next 12 months.Barclays expects the copper prices to trade at an average of $4,150 per ton through the second half of 2016.On the other hand, Commerzbank retained its earlier price forecast of $5,200 per mt by the end of 2016. According to them, the seasonal drop in demand from China will be give way to surging demand after two months. The consensus forecast by 30 institutions sees copper averaging at $4,867 per mt during the last quarter of the current year.The primary reasons to remain bearish on copper prices despite Wednesday’s rally are concerns over whether the People’s Bank of China will provide stimulus to boost the economy and the supply glut.China’s copper imports were also down an annual 14.3 percent in July at 360,000 tonnes.Countries like Peru, Indonesia and Zambia are expected to hit the market with additional mine output, a move that will add to the large market surplus.
Saudis continued to focus on market share rather than trying to solve the supply glut by curbing production.Saudi Arabia pumped 10.67 million barrels per day in July, according to figures it provided to OPEC which published them in a monthly report on Wednesday. Total OPEC production was up 46,000 barrels per day to 33.11 million barrels per day.
China’s central bank will inject 100 billion yuan ($15.07 billion) into money markets through seven-day reverse bond repurchase agreements on Thursday, traders said.
Maturing reverse repos will drain a net 375 billion yuan from the banking system this week.
The People’s Bank of China drained a net of 161.5 billion yuan from the banking system last week.
($1 = 6.6345 Chinese yuan)
U S DOLLAR:
U.S. worker productivity fell for a third straight quarter during the April to June time period. This news drove U.S. Treasury yields lower as investors began to reduce the chances for a Fed rate hike in 2016. Lower yields weighed on the U.S. Dollar which made it a less desirable investment.
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