Copper bulls retreat on signs Chinese demand weaker

Immediate Delivery

The premium copper buyers are asked to pay in Europe fell for a second consecutive month, a sign that demand is weakening, according to estimates from six traders with direct knowledge of the market published on March 12. The premium is added to the price of cathode, a finished form of the metal, for immediate delivery on the LME at Rotterdam and includes insurance and shipping costs.

Europe accounts for more than 17% of world copper demand and the 17-nation euro region is already back in a recession. The International Monetary Fund has cut its estimate for this year’s global economic growth three times since July. The Washington-based group is predicting a gain of 3.5% this year, from 3.2% in 2012.

Goldman recommended investors buy copper on March 1 after prices slumped and the bank is predicting that the metal will reach $9,000 in six months. Chinese growth will improve and current prices already reflect concerns about Europe and the impact of automatic spending cuts in the U.S. budget, analysts Max Layton, Roger Yuan and Jeffrey Currie said in the report.

Economic Growth

Chinese economic growth will accelerate to 8.3% in the second quarter, from 8.1% in the first three months of the year, according to the median of as many as 27 economist estimates compiled by Bloomberg. The U.S., the second-biggest copper consumer, will expand 2% this quarter, from 0.1% in the final three months of 2012, the forecasts show.

While Barclays expects surplus supply for 2013 as a whole, it is also anticipating shortages in the second and third quarters. It is also predicting demand growth of 3.4% this year, from 0.9% in 2012.

In other commodities, six of 10 people surveyed expect raw sugar to rise next week and two predicted a drop. The commodity slid 3.6% to 18.81 cents a pound on ICE Futures U.S. in New York this year.

Fifteen of 27 people surveyed forecast higher corn prices and eight said the grain will drop, while 12 of 27 said soybeans will decline and eight expected higher prices. Fifteen of 24 traders predicted gains in wheat and eight were bearish. Corn gained 2.7% to $7.17 a bushel in Chicago this year as soybeans rose 2% to $14.3775 a bushel. Wheat slipped 7.2% to $7.2175 a bushel.

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