Comex copper for May delivery falters to 1.9745 as the upbeat market sentiment diminished. In 1Q09, copper price rallied 29%, amongst the best performers in the commodity group. This was mainly driven by the apparent surge in demand by China's State Reserve Bureau (SRB) buying, tightening in scrap market and improved market sentiment.
China's State Reserve Bureau had planned to buy up to 600Kt of copper so as to increase its strategic reserve. According to industry source, since early January, Chinese buyers have been absorbing all excess copper (excess supply as well as shortfalls from US and European buyers) from Chilean producers. Apart from Chili, producers from Australia, Europe, and Japan have all shipped copper to China. However, purchase from China should have come to an end after several months' of aggressive stockpiling and the main issue returns to real end-demand.
Shortage in scrap metals made smelters unable to produce copper metals to meet the demands and the market could only rely on copper from mines. This helped bid up copper price. However, accuracy on copper scrap statistics is questionable.
Copper's demand outlook turns pessimistic after China's SRB buying. Analysts forecast global copper demand will plunge 5-10% in 2009 while non-China demand may drop by more than 15% because orders for copper semis and wired products have remained sluggish since the beginning of the year.
If such condition persists, we will likely see copper correct most of its previous gain in the second half of 2009.
Platinum price slides to 1165.5 after gaining 1.9% to settle as 1175 Tuesday. SEC website showed that a UK ETF Securities filed with the SEC to register platinum and palladium trusts. If the trust can eventually be listed, a new PGM ETF will draw abundant demand for platinum and palladium and should be able to offset, as least partially, weakness in demand from autocatalyst market.
Also supported platinum price was potential drop in platinum production in South Africa, the world's largest producer of platinum. The South African central bank said that the nation's economy may contract in 1Q09 after declining 1.8% in the previous quarter. Moreover, the Government may not be able to allocate sufficient funding to assist mine operations.
The June contract for gold rebounds for the second day after diving to 865 Monday. Demand for safe-haven comes back as investors worry about 1Q09 earning from listed companies as well as the situation of toxic assets held by banks and insurance companies. In the near-term, investors should beware of another round of gold correction as it's likely for stock markets(technically) to rebound again. However, over the long-term, we remain bullish.
Crude oil price slips below 48 ahead of the inventory report by the US Energy Department. Moreover, UBS slashed its estimate on crude oil price to $51/bbl, 15% lower than its previous forecast, in 2009 as oil demand will continued to be weighed on by global economic downturn.