Copper Fundamental Forecast – September 9, 2016

Copper dipped 4 points to trade at 2.094 showing little reaction to stronger Chinese imports and exports as reported this morning. Copper rose to the highest in two weeks on Wednesday as a falling dollar spurred demand for commodities given fading prospects of a US interest rate hike in September.

US service sector activity slowed to a 6-1/2-year low in August amid sharp drops in production and orders, pointing to slowing economic growth that further diminished prospects for an interest rate hike from the Federal Reserve this month.

A weaker dollar makes commodities more affordable for buyers paying with other currencies. But analysts did not expect the dollar effect on demand to last, given a flood of new mine supply. Sources said there might also be actual demand from Chinese domestic downstream end-users as they had started to stock up to meet year-end orders, while others said the stronger yuan against the dollar had also lifted the premium.

“We reiterate our second half 2016 view that copper and… aluminum are expected to move lower on a combination of slowing demand growth and rising supply, and zinc and nickel set to rise on idiosyncratic supply factors,” Goldman Sachs said in a note.

China’s copper exports have seen a surge in the past few months with exports at 75,022 mt of unwrought copper and alloys in July, up from 14,958 mt in July 2015, and 42,615 mt in June compared with 14,613 mt in June 2015, with 84,984 mt in May versus 24,005 mt in May 2015.

Over January-July, China exported 280,831 mt of unwrought copper and alloys, up fourfold year on year.

Ahead of options expiry later in the session, positioning had accelerated copper’s short-covering rally this morning, a broker said.

“It’s all about expiry today,” said the broker, adding that key options strike prices were at the $4,600 and $4,700 a tonne levels.

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 September 9, 2016

Government Bond Auctions

Date Time Country Auction

Sep 08 11:00 Ireland Holds bond auction

Sep 08 17:20 Italy Announces details of bond auction