Copper demand will outpace supply by 288,000 tons in the two quarters through September, reducing this year’s surplus to 56,000 tons, according to Barclays. The drop since mid-February presents a buying opportunity and prices will reach $9,000 in six months as China imports more metal, Goldman said in a March 1 report. Chinese refined copper imports in January were up 5.4% from October’s 15-month low, customs data show.
Goldman’s bullish outlook contrasts with hedge funds’ expectations for further declines. Speculators held a net-short position of 7,172 futures and options as of Feb. 26, the most since Aug. 14, compared with a net-long position of 11,413 contracts the week before, U.S. Commodity Futures Trading Commission data show.
There are signs that demand may be slowing. Inventories in warehouses tracked by the LME, the largest metals bourse, are 509,425 tons, the most since April 2010, exchange data published today show. Orders to withdraw copper slumped 67% since Jan. 4 and reached an almost nine-month low on March 6.
This year’s oversupply may increase if the debt crisis worsens in Europe, a region that accounts for 17% of copper demand. The IMF expects a second year of contraction there. Budget cuts and economic reforms were rejected by more than half of voters in an Italian election last month, undermining optimism that Europe will come out of its recession.
Prices will come under pressure this year as demand slows and supply starts to increase, Steven Lewis, a senior copper analyst at Wood Mackenzie Ltd., said March 7 at a conference in Madrid. China called for higher down payments for second-home mortgages in some cities on March 1 in an attempt to cool the property market. Construction accounts for about 40% of usage, the Copper Development Association estimates.