Monday, 07 September 2015 16:51
LONDON: Copper gained on Monday after commodity group Glencore announced plans to shut down loss-making mines to help reduce a glut of supply that has weighed on prices.
Bearish investors scrambled to close out positions by buying futures, but analysts said it was uncertain whether Glencore’s move to close down some African copper operations for 18 months would create a trend.
“It’s probably not enough to see prices go up (substantially), but it certainly supports the market,” said Grant Sporre, head of metals research at Deutsche Bank in London.
“It also ensures that copper is probably not going to fall in the same way that iron ore and met (metallurgical) coal have done.” Sporre had forecast a global copper supply/demand surplus of 350,000 tonnes for next year, and since Glencore’s move is expected to remove 300,000 tonnes in 2016, he said it would bring the market close to balance.
Glencore’s mine closures, which were due to remove 400,000 tonnes of copper cathode from the market over 18 months, were part of a wider initiative that included suspending dividends, selling assets and raising $ 2.5 billion in a new share issue as it aimed to slash debt.
Three-month copper on the London Metal Exchange had climbed 1.2 percent to $ 5,183 a tonne by 1027 GMT, cutting 2.4 percent losses from the previous session. Shanghai Futures Exchange copper rose 0.8 percent to 39,370 yuan ($ 6,183) a tonne.
The news encouraged buying early in London and forced shorts to cover, traders said. “Short positions held by the non-trade sector are running at all-time highs and the day will come when they start to cover which will lead to a very short, sharp rally,” said Kingdom Futures in a note.
There have been signs of a pick-up in copper demand from mainland China, said analyst Dan Morgan of UBS in Sydney.
“Merchant premia in China have lifted quite strongly which, with prices being relatively cheaper now, suggests we might see a little bit of a lift in copper imports.”
China’s top state planner said on Monday that the country’s power usage, train freight and property market have all shown improvement since August, indicating that the economy is stabilising and potentially shoring up metals demand.
Reflecting a slightly less bearish view on copper, hedge funds and money managers cut a net short position on copper for the fourth straight week to the smallest since mid-June, US Commodity Futures Trading Commission data showed.
LME aluminium was up 0.3 percent to $ 1,612.50 a tonne and zinc was 0.6 percent firmer at $ 1,795.50. Nickel slipped 0.5 percent to $ 9,855.
