By Jim Williams
Copper tumbles after another stalemate in the talks in Greece and as a seasonal demand slowdown in top copper user China hurt sentiment. The red metal appears to be heading for a fifth consecutive week of falls.
JP Morgan’s James Glassman, says Greece will move closer to a deal soon. He predicts the Greek issue will not be disruptive for the global markets as the European Central Bank (ECB) is backing its asset purchases. If Greece doesn’t close in on a deal with the European Union and the International Monetary Fund, the country will default on a 1.5 billion euro ($1.7 billion USD) debt repayment to the IMF due by the end of the month.
Glassman expects the US Federal Reserve to hint at a strengthening U.S. economy and says the rate hikes will be a slow and gradual process.
“Over the past week and a half, any weakness (in the U.S. dollar) has done nothing for metals, whereas strength has pushed them lower, suggesting there are wider concerns about fundamentals,” said Nic Brown, head of commodities research at Natixis.
Brown was more positive on copper’s short-term future, saying “We expect copper prices to rise over the second half. The supply side is significantly weaker than we thought it would be and … end-user consumption (in China) remains robust.”
Despite his optimism, many investors still expect copper prices to fall. Justin Lennon, of Mitsui Bussan Commodities USA, said Monday’s price action has put copper in sight of the five and a half year lows from back in January.
“There hasn’t been a terrific amount of support on the physical side. Western world speculators don’t seem interested and the Chinese seem to be shorting (copper).”
Goldman Sachs Group has said that its outlook for copper is among the most bearish for raw materials because the metal will fall as the dollar strengthens and demand from China’s construction industry wanes.
China’s copper imports fell 16.3 percent from April to 360,000 tons in May, data from the General Administration of Customs showed.
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