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Ardent Listener
Administrator
USA
4841 Posts |
 Posted - 06/24/2009 : 21:17:44
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Metals ‘to Suffer’ as China Ends Stockpiling Drive, Blanch Says
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By Jason Scott and Bernard Lo
June 24 (Bloomberg) -- Metals prices may decline in the next three months as China, the world’s biggest user, begins to run down inventories that were built up earlier this year, according to Francisco Blanch at Merrill Lynch & Co.
“China has been accumulating inventories of commodities for the last six months or so,” Blanch, head of global commodity research at Merrill, said today in an interview. “This accumulation of inventories now needs to be cleared off. End-user demand in China has not really picked up.”
Metals prices surged as much as 48 percent this year to a June 11 peak on restocking by Chinese companies and speculation that the nation’s State Reserve Bureau was also buying metals to build up stockpiles. China’s copper imports in May rose to a record, according to Guantong Futures Brokerage Co.
“Inventories in relation to demand will probably prove, in my opinion, to be a bit overdone in the short run, which is why we expect commodity prices to come off,” Blanch told Bloomberg Television. “Oil and the metals markets will start to suffer because of large inventory accumulation.”
Jim Lennon, senior commodities strategist at Macquarie Bank Ltd., said last month that China, including the State Reserve Bureau, was “taking virtually all of the copper out of the system” and that the pace of the nation’s demand may slow. Copper prices may drop “on falling Chinese buying interest,” according to a May 8 report from Societe Generale SA.
Import Forecast
Pan Pacific Copper Co., Japan’s biggest smelter of the metal, forecast on June 19 that China’s copper imports may plunge to 300,000 tons in the three months to Sept. 30. Imports were 748,281 tons in the first quarter and totaled 655,177 tons in April and May, according to customs data.
Copper futures on the London Metal Exchange have surged about 58 percent this year, and traded today at $4,863 a metric ton. Blanch didn’t give a precise forecast for the metal, which is used to make pipes and wires.
Stockpiles of copper monitored by the Shanghai Futures Exchange rose last week to the highest in 21 months, totaling 68,536 tons, nearly quadruple the level at the start of the year. The exchange’s tally does not include material held by the State Reserve Bureau.
The stockpiling comes amid complaints lodged with the World Trade Organization by the European Union and the U.S. about Chinese export restrictions on magnesium, coke and zinc. China is unfairly using export taxes to keep materials costs lower for domestic steel and manufacturing companies, hurting overseas competitors, according to the U.S. and the EU.
‘Further Downturn’
“The story in China in this particular case could obviously result in restrictions in other parts of the trading world,” Blanch said. An increase in protectionism may be “a key driver of a further downturn in trading, which could be quite negative,” he said.
Crude oil fell to less than $69 a barrel in New York after- hours electronic trading today after an industry report showed an increase in U.S. gasoline inventories, raising concern the global recession will sap fuel demand.
“Oil will head toward the low $60s by the end of the year,” Blanch said. “I just think we’ve run way too far. $70 a barrel is a mid-cycle price. There is more downside risk than upside in the next three months.”
To contact the reporters on this story: Jason Scott in Perth at Jscott14@bloomberg.net; Bernard Lo in Hong Kong at blo2@bloomberg.net
Last Updated: June 24, 2009 01:36 EDT
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Nickelless
Administrator
USA
5580 Posts |
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Ardent Listener
Administrator
USA
4841 Posts |
Posted - 06/25/2009 : 20:39:22
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quote:
Originally posted by Nickelless
Do declining base metal prices necessarily bring down PM prices? What's the general trend for PM prices remaining steady or rising when base metals drop, or vice versa?
They often but not always move together. But that has more to do with the strength of the dollar than anything else. But if China isn't spending its dollars on metals, base or precious, there must be a better reason than they don't happen to need them right now. |
Realcent.forumco.com disclosure. Please read.
All posts either by the members, moderators, and the administration of http://realcent.forumco.com are for your edification and amusement only. It is not the intent of realcent.forumco.com or its host to provide investment, medical, matrimonial, legal, security or tax advice and nothing posted here should be considered to be so. All rights reserved.
Think positive. |
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Nickelless
Administrator
USA
5580 Posts |
Posted - 06/25/2009 : 20:41:37
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quote:
Originally posted by Ardent Listener
quote:
Originally posted by Nickelless
Do declining base metal prices necessarily bring down PM prices? What's the general trend for PM prices remaining steady or rising when base metals drop, or vice versa?
They often but not always move together. But that has more to do with the strength of the dollar than anything else. But if China isn't spending its dollars on metals, base or precious, there must be a better reason than they don't happen to need them right now.
Any ideas on what other things they might be doing or planning for that they don't need metals at the moment? |
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theo
Penny Hoarding Member
USA
588 Posts |
Posted - 06/25/2009 : 22:23:41
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quote:
Originally posted by Nickelless
quote:
Originally posted by Ardent Listener
quote:
Originally posted by Nickelless
Do declining base metal prices necessarily bring down PM prices? What's the general trend for PM prices remaining steady or rising when base metals drop, or vice versa?
They often but not always move together. But that has more to do with the strength of the dollar than anything else. But if China isn't spending its dollars on metals, base or precious, there must be a better reason than they don't happen to need them right now.
Any ideas on what other things they might be doing or planning for that they don't need metals at the moment?
I think China is trying to build up its infrastructure so I'm sure they are also buying plenty of cement, aluminum and steel. I think their military spending has also increased in an effort to modernize their armed forces. Specifically I've heard that the Chinese have the goal of building a blue water navy.
I've heard some speculation about the possibility of giving them access to some of our military technology in exchange for forgiveness on some our debts. This is unconfirmed and I know its sounds farfetched, but I wouldn't put anything past this administration. |
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Nickelless
Administrator
USA
5580 Posts |
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theo
Penny Hoarding Member
USA
588 Posts |
Posted - 06/25/2009 : 23:38:19
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quote:
Originally posted by Nickelless
What's a blue-water navy?
And I agree, I wouldn't put anything past this administration when it comes to compromising national sovereignty or security.
Its a navy capable of operating out on the open ocean and away from a friendly coast. It gives a nation the ability to better project and influence around the world. This is in contrast to the brown water navies which are basically coastal defense forces. |
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keys
Penny Collector Member
383 Posts |
Posted - 06/26/2009 : 07:47:54
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[/quote]Any ideas on what other things they might be doing or planning for that they don't need metals at the moment?
[/quote]
I had read that China is using some of its cash reserves to become co-owners in mines around the world (Africa, South America, Australia, etc) basically owning the mines means that China gets the metals at cost. China ends up with the metals while moving out of the dollar quietly so as to not harm the value of their US Dollar assets.
Read more about it here
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I change with the times-
but like silver coins found in your change
I stay the same.
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theo
Penny Hoarding Member
USA
588 Posts |
Posted - 06/26/2009 : 09:52:39
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quote:
Originally posted by theo
quote:
Originally posted by Nickelless
What's a blue-water navy?
And I agree, I wouldn't put anything past this administration when it comes to compromising national sovereignty or security.
Its a navy capable of operating out on the open ocean and away from a friendly coast. It gives a nation the ability to better project power and influence around the world. This is in contrast to the brown water navies which are basically coastal defense forces.
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horgad
1000+ Penny Miser Member
USA
1641 Posts |
Posted - 06/26/2009 : 13:32:10
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| There is no sign of this happening yet according to the LME warehouse stock. However it definitely could happen. Meanwhile, the Chinese have dollars to spend and they have to buy something or risk parking the money in US bonds. Base metals seem like as good as place as any. |
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Metals ‘to Suffer’ as China Ends Stockpiling Drive
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