Metals Analysts See Copper In Extended Decline

Metals Analysts See Copper In Extended Decline

$JJC, $OIL, $USO, $GLCNF, $GS

Copper (NYSEArca:JJC) to continue to decline as the US Fed starts to raise interest rates, demand growth stalls in China and stockpiles grow, according to Goldman Sachs Group Inc (NYSE:GS), which stood by a year-end forecast that signals the biggest annual drop since the global financial crisis.

Prices are likely to drop to 4,800 tonne by the end of December and 4,500 at the end of Y 2016, GS analysts wrote in a report.

The Red metal traded at 5,0510 at the close Thursday in London. A drop to Goldman’s end-2015 target implies a full-year retreat of 24%, the most since the 54% plunge in Y 2008.

Copper retreated along with Nickel, Zinc and Crude Oil this year as commodities were pummeled by the slowdown in the biggest user of base metals and excess supplies.

While the retreat in Copper prompted Glencore Plc (OTCMKT:GLCNF) to announce supply cuts at operations in Africa, Goldman said that such reductions served only as a confirmation that demand was weak. The New York-based bank said consumption in China would not grow at all this year, and forecast global surpluses of at least 500,000 tonnes from Ys 2016 to 2019.

There will be about 530,000 tonnes more global supply than demand in Y 2016, Goldman said, paring its estimate from about 670,000 tonnes. The worldwide surplus was seen at 566,000 tonnes in 2017, 626,000 tonnes in Y 2018 and 657,000 tonnes in Y 2019, it said.

The Fed refrained from the first increase in US borrowing costs since Y 2006 this month amid concern that financial-market turmoil spurred by China’s slowdown may hurt the outlook for US growth and inflation. Policy makers at the FOMC would tighten in December, Goldman said.

Global stockpiles were seen increasing by as much as 1-M tonnes between November and March, Goldman said in the report, which was titled ‘Copper’s Bear cycle still has years to run.’ Holdings in LME-tracked warehouses stood 327,175 tonnes as of Wednesday, according to LME exchange data.

Further losses in energy prices may also hurt Copper, according to Goldman. There was potential for WTI Crude Oil at 20 bbl should storage constraints be beached, it said. Brent Crude Oil finished at 48.16 Thursday.

Stay tuned…

HeffX-LTN

Paul Ebeling

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