Here's a negative view on copper prices.
Commodity Strategists: Copper May Plunge, Calyon Says 2005-06-07 10:37 (New York)
By Chanyaporn Chanjaroen
June 7 (Bloomberg) -- Copper prices may fall by more than a
quarter by year-end from near a record high as speculators
holding the metal sell, said Maqsood Ahmed, an analyst at Calyon
Global Trading, a unit of Credit Agricole SA.
Prices remain near a record because ``the metal is being
hoarded'' by speculative funds, said Ahmed, who has worked in the
mining and metals industry since 1993. Holders will sell when
prices are high enough, Ahmed, 35, said in a phone interview
yesterday. He didn't say at what price they may sell.
Some ``bigger merchants and macro-hedge funds'' may hold as
much as 300,000 tons of copper worth about $1 billion that isn't
in warehouses registered with futures exchanges, according to
Ahmed. Copper inventories monitored by exchanges in London, New
York and Shanghai fell to 79,899 tons this week, the lowest since
1990, according to London metals consulting company CRU.
Copper for immediate delivery on the London Metal Exchange,
or LME, will probably fall 27 percent to about $2,400 a metric
ton between now and year-end, Ahmed said. Prices for delivery in
three months rose to a record $3,338 a ton April 12. They were at
$3,275 as of 2:48 p.m. in London today. Prices for immediate
delivery, or cash prices, have averaged $3,291 this year.
Ahmed, who describes himself as a ``base-metal bear,'' had
the lowest forecast of 22 analysts surveyed by Bloomberg News on
copper prices for 2005 and the 16th lowest of 19 polled for 2004.
Ahmed last month joined Calyon Global Trading, an over-the-
counter trader of base-metals derivatives, from Calyon Financial
Inc., one of the 11 so-called ring dealers that trade on the
floor of the LME. Funds account for a ``large amount'' of Calyon
Financial's business, Ahmed said. As much as 60 percent of LME
trade is accounted for by funds, he estimates.
Copper Demand
Prices for copper rose 37 percent last year as consumption
in China, the world's largest user, expanded 13.5 percent,
leaving a supply shortage of 876,000 tons, according to estimates
from Morgan Stanley.
Ahmed's forecast echoes that of Macquarie Bank Ltd., whose
London-based analysts Jim Lennon and Adam Rowley said in a report
yesterday prices will fall to $2,866 a ton in the fourth quarter.
They predict the market will have 70,000 tons of oversupply.
``Someone must be holding metal off the market,'' the
analysts wrote, adding copper producers are unlikely to be the
inventory holders. Macquarie Bank's copper-price forecasts were
among the highest in Bloomberg News's 2004 and 2005 annual
surveys.
Cooling
Copper demand in China and the U.S., the largest consumers
of the metal, won't repeat the growth of 2004, Ahmed said.
China's demand for copper, which is used for making electrical
wire, pipe and auto parts, will rise around 10 percent this year,
from as much as 15 percent last year.
China's economy grew 9.5 percent last year, raising concern
about inflation and prompting the Chinese government to raise
interest rates and limit lending.
China ``is still skewed towards cooling the economy down,''
Ahmed said. ``Taking the cautionary view, we have not lowered
copper demand too aggressively but we expect it to undershoot.''
Copper imports into China fell for the 12th straight month
in April, figures from the country's customs office show.
In the U.S., data from copper users such as brass mills and
wire-rod producers indicated a decline in the first quarter,
Ahmed said, adding economic data such as the manufacturing index
``is also heading in the wrong direction for metal demand.''
U.S. manufacturing in May expanded at the slowest pace since
June 2003. A Labor Department report on June 3 showed the economy
last month added fewer jobs than economists forecast.
Ahmed holds a mining engineering degree from Nottingham
University and worked as a mining engineer in 1993 at Mount Isa
Mines Ltd. in Australia. He became a commodities analyst with
Deutsche Bank AG in 1994 before joining Credit Lyonnais Rouse in
1996. |
