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Morgan Stanley: Copper ‘Most Compelling Metal’ In Second Half
Monday July 21, 2014 8:03 AM
Morgan Stanley characterizes copper as the “most compelling metal” for the second half of 2014. The firm says the outlook has improved in recent weeks, with demand in Europe and the U.S. picking up pace against a backdrop of re-accelerating industrial activity. State Grid Corp. of China's consumption may be back-ended, as year-to-date spending is about flat compared to last year, well below Beijing’s 20% year-on-year 20% target, Morgan Stanley says. Meanwhile, the firm says commercial inventory is at a two-year low and dropping amid a global scrap shortage that encourages refined production. “Miners are struggling to bring adequate supply to market, with (year-to-date) disruptions totaling 3% of annual capacity,” Morgan Stanley says. “This total is likely to climb following Newmont’s force majeure declaration at Batu Hijau,, and notable excludes reduced output at two other major operations in Indonesia that have halted exports since mid-January.” Morgan Stanley says it looks for copper to average $7,055 a metric ton in the second half of 2014 and $7,400 in 2015.
By Allen Sykora of ***** News;asykora@*****.com
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BMO: Average Copper Prices To Slide To $2.90/Lb. In 2016
Monday July 21, 2014 12:18 PM
BMO looks for average copper prices to fall back to around $2.90 a pound in 2016, before recovering to longer-term levels around $3. The red metal has pulled back from recent highs above $3.25. BMO says those highs were driven by China’s Purchasing Managers Index and gross domestic product data, but could would be sustained only if lingering concerns such as China’s property sector improved. “Thus far, housing starts remain down in H1/14, with June recently reported at minus 9% year-on-year,” BMO says. “Further, while new yuan loans increased 26% in June following a ‘mini stimulus’ program easing credit restrictions for certain sectors, BMO Research understands that the vast majority of new loans were short term in nature and government-led.” On the supply side, mining companies reporting second-quarter and first-half copper output figures thus far have either met or beat BMO expectations, with guidance either flat or increased for this year, the firm continues. “This continues to point to strong supply growth near term, and the risk that, like 2013, this year’s ‘supply disruption’ could be lower than the historical average of 5% and consensus supply revised upward,” BMO says.
By Allen Sykora of ***** News;asykora@*****.com
