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Monday, May 5, 2014
Barclays cuts Q2 price forecast for LME Copper from $7,300 to $6,900 a ton
British banking giant Barclays has marked lower their LME copper second-quarter price forecast from $7,300 a ton to $6,900 a ton but continue to see upside from current levels.
According to Barclays. first-quarter LME copper prices were in line with their forecast of $7,100 a ton, averaging $7,037 a ton.
Barclays maintains their second half price forecast for LME copper to trade around $7,000 a ton. Much will depend on China. The strong sequential recovery in Chinese economic growth our economists are forecasting will be needed to prevent a ballooning copper market surplus.
Chinese market participants have indicated demand has begun to pick up. Factories reported a moderate bounce in orders that allowed them to source more raw materials. The State Grid Corp of China awarded two rounds of tenders in March, and other infrastructure projects are also under way. At the same time, government reassurances that China could deliver growth began to steady sentiment.
However, demand is still best described as lukewarm rather than very hot. YTD State Grid transformer tenders are still 13% lower y/y, and tight credit continues to constrain a variety of activities, from construction to property sales, said Barclays.
Barclays expects imports to begin to thin in the coming months, reflecting soured financing appetite and high bonded inventories. While recent feedback suggests that inventories have flattened as outflows from the warehouses to the domestic market roughly offset imports and smelter deliveries to the warehouses, Chinese demand needs to pick up more strongly for the market to rebalance.