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China Continues to Influence Copper

By Jim Williams

Copper prices continue to bounce around based on data coming out of China. Official data released Friday showed that industrial production in China rose 7.2% in November, missing expectations for an increase of 7.5% and slowing from a 7.7% gain in October.

The weak data adds to fears that China will miss its annual growth target of 7.5% and boosted speculation that the government will need to roll out new stimulus measures to avoid a sharper slowdown.

“The Chinese data was quite bad and the whole series of weak data that we’ve got over the past few weeks points to lower prices going forward,” said analyst Daniel Briesemann at Commerzbank in Frankfurt.

“I’m surprised that prices aren’t lower. I think that’s because there’s still expectation that the Chinese government will introduce further stimulus measures to prevent a sharp drop in the economy.”

“On the demand side, China is still positioning for a deceleration,” said analyst Dominic Schnider of UBS Wealth Management in Singapore.

Broader market sentiment didn’t help – oil futures sank towards $59 per barrel for the first time since May 2009, and Russia’s central bank raised its key interest rate to 17 percent in an attempt to stabilize the rouble.

 “(On falling oil) people underestimate that the cost curve comes down and people should take that into consideration next year,” Schnider of UBS adds. “Supply can be stronger than people think. That means on net-net basis I still have difficulties seeing copper rising.”

The prediction of oversupply in 2015 continues to haunt the copper market. China’s production of refined copper rose 3.1 percent from November, hitting a record for the fourth straight month as high processing fees prompted smelters to produce more metal.

This week, the focus on the red metal shifts to the US as investors wait for the outcome of Wednesday’s Federal Reserve policy meeting to see when interest rates might start to rise.

Here is a deeper look at the future of copper. The article was found on Morningstar.com. Author Daniel Rohr makes some strong points about the future price of copper.
Copper’s Resilience Won’t Last

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