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Copper Monthly Fundamental Forecast – December 2015

By:
Barry Norman
Published: Dec 1, 2015, 14:27 UTC

Outlook and Recommendation Copper remains weak as global consumption falls and the dollar strengthens. Copper moved into December trading at 2.056. Copper

Copper Monthly Fundamental Forecast – December 2015

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Outlook and Recommendation

Copper remains weak as global consumption falls and the dollar strengthens. Copper moved into December trading at 2.056. Copper lost over 11% in November. Metals prices have rallied off six-year lows this week on hopes that Chinese producers will cut output in the face of low prices. Moreover, Bloomberg reported this week that Chinese authorities are weighing state purchases to support prices near the lowest in years. Bloomberg also reports that Chinese regulators are also considering a request from the association to probe short-selling in metals.

According to Bloomberg and the Financial Times, Chinese nickel producers are expected to meet this week to decide upon output cuts, after a group of 10 zinc smelters last week announced they would cut production while the China Nonferrous Metals Industry Association has reportedly asked China’s National Development and Reform Commission to buy up stocks of excess metal.

But if history’s anything to go by, a decision to buy up excess stocks of nickel, copper, aluminum and zinc will only end in disaster for the metals markets.

In a note to clients, Goldman Sachs summed up the argument for/against state intervention nicely:

“State Reserve Bureau buying of metals and/or government investigations of short positioning, would in our view at best temporarily support metals prices, potentially providing a selling/producer hedging opportunity over the coming month. Indeed, ultimately, to the extent these measures are implemented in order to support jobs, this supports Chinese metals output, which is ultimately bearish for prices.

An investigation of market short positions could result in a short covering related rally, however this would not change the underlying bearish fundamentals which in our view predicated the positions in the first place.”

The last time China’s State Reserve Bureau tried to intervene in the metals markets was back during the global financial crisis when the SRB stepped in to purchase copper after the price of the metal collapsed. SRB buying sent the price of copper to an all-time high during 2011 but ignited a gold rush (or copper rush) among producers. During the first seven months of 2015, the global copper market had a surplus of 8,000 tonnes compared with a deficit of 563,000 tonnes in the same period a year earlier. LME copper stocks are still up 60% this year, and it’s estimated that approximately 20% of copper output is loss-making because producers expect prices to bounce and are unwilling to cut output, preferring instead to cut costs.

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more recent analysis and information in our weekly reports and we provide daily updates and outlooks.

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Major Economic Events That Will Affect The Markets In December

 

Cur.

   

Event

 

 

 

 

 

Tuesday, December 1, 2015

 

  CNY

 

Manufacturing PMI (Nov)

 

 

 

 

 

 

  CNY

 

Caixin Manufacturing PMI (Nov)

 

 

 

 

 

 

  AUD

 

Interest Rate Decision (Dec)

 

 

 

 

 

 

  AUD

 

RBA Rate Statement  

 

 

 

 

 

 

  EUR

 

German Manufacturing PMI

 

 

 

 

 

 

  EUR

 

German Unemployment Change

 

 

 

 

 

 

  GBP

 

BoE Gov. Carney Speaks  

 

 

 

 

 

 

  GBP

 

Manufacturing PMI (Nov)

 

 

 

 

 

 

  USD

 

ISM Manufacturing PMI (Nov)

 

 

 

 

 

Wednesday, December 2, 2015

 

  AUD

 

GDP (QoQ) (Q3)

 

 

 

 

 

 

  GBP

 

Construction PMI (Nov)

 

 

 

 

 

 

  EUR

 

CPI (YoY) (Nov)  

 

 

 

 

 

 

  USD

 

ADP Nonfarm

 

 

 

 

 

 

  USD

 

Fed Chair Yellen Speaks  

 

 

 

 

 

Thursday, December 3, 2015

 

  GBP

 

Services PMI (Nov)

 

 

 

 

 

 

  EUR

 

Interest Rate Decision

 

 

 

 

 

 

  EUR

 

ECB Press Conference  

 

 

 

 

 

 

  USD

 

Yellen Testifies  

 

 

 

 

 

Friday, December 4, 2015

 

  AUD

 

Retail Sales (MoM) (Oct)

 

 

 

 

 

 

  USD

 

Nonfarm Payrolls (Nov)

 

 

 

 

 

 

  USD

 

Unemployment Rate

 

 

 

 

 

 

  EUR

 

ECB President Draghi 

 

 

 

 

 

Tuesday, December 8, 2015

 

  CNY

 

Trade Balance (Nov)

 

 

 

 

 

 

  GBP

 

Manufacturing Product

 

 

 

 

 

Wednesday, December 9, 2015

 

  CNY

 

CPI (YoY) (Nov)

 

 

 

 

 

 

  NZD

 

Interest Rate Decision

 

 

 

 

 

Thursday, December 10, 2015

 

  AUD

 

Employment Change

 

 

 

 

 

 

  GBP

 

Interest Rate Decision

 

 

 

 

 

Friday, December 11, 2015

 

  USD

 

Core Retail Sales (MoM)

 

 

 

 

 

 

  USD

 

PPI (MoM) (Nov)

 

 

 

 

 

 

  USD

 

Retail Sales (MoM) (Nov)

 

 

 

 

 

Saturday, December 12, 2015

 

  CNY

 

Industrial Production

 

 

 

 

 

Sunday, December 13, 2015

 

  JPY

 

Tankan Large

 

 

 

 

 

 

  JPY

 

Tankan Large Non-

 

 

 

 

 

Tuesday, December 15, 2015

 

  GBP

 

CPI (YoY) (Nov)

 

 

 

 

 

 

  EUR

 

German ZEW Economic

 

 

 

 

 

Wednesday, December 16, 2015

 

  EUR

 

German Manufacturing

 

 

 

 

 

 

  GBP

 

Claimant Count Change

 

 

 

 

 

 

  EUR

 

CPI (YoY) (Nov)

 

 

 

 

 

 

  USD

 

Fed Interest Rate

 

 

 

 

 

 

  NZD

 

GDP (QoQ) (Q3)

 

 

 

 

 

Thursday, December 17, 2015

 

  EUR

 

German Ifo Business

 

 

 

 

 

 

  GBP

 

Retail Sales (MoM) (Nov)

 

 

 

 

 

Thursday, December 24, 2015

All Day

 

Holiday

Germany – Christmas Eve

 

 

Holiday

United States – Christmas Eve – Early close at 13:30

                     

 

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