BofAML: Un cobre débil pese a la fortaleza China

Redacción - Martes, 31 de Mayo

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Global Metals Weekly: Copper weakness despite China strength

•   The long-standing positive correlation between copper and oil has broken down on diverging fundamentals
•   China's physical copper market is extremely weak as the country's imports were running well ahead of consumption YTD.
•   As rebalancing unfolds, we remain cautious copper, but we see upside in 2H on tight scrap and slow global supply growth

Oil rallies, copper declines

Copper has faced immense headwinds, with prices declining by 10% from recent highs at $5,064/t ($2.30/lb). This correction was remarkable for various reasons. To pick just one noteworthy dynamic, the long-standing positive correlation between copper and oil prices has broken down. In our view, this is justified given the current fundamental backdrop. Oil prices were supported by supply disruptions/ losses, seasonal peak demand and inventory draws. Meanwhile, LME copper stocks have stopped drawing and China's copper market remains extremely weak. Given this backdrop, we maintain our cautious near-term view on copper.

China's physical copper market extremely weak

Taking a closer look at China, we note record copper net imports of 435kt in March, well above the levels required to plug the country's metal deficit, which we estimate averages 270kt per month in 2016. Hence, inventories built and the physical market weakened significantly. Given this backdrop, incentives to ship metal to China are limited now and it is not surprising that the country's imports have fallen, which our models suggest will continue. Reduced buying from China is a key reason, LME stocks have stopped drawing. In our view the rebalancing in China will continue through the summer, but once the copper overhang has normalised, we expect copper purchases to resume, which should then give more support to copper quotations.

Rebalancing should increasingly support prices into 2H

Our constructive copper view for the latter part of the year incorporates an expectation that the Chinese government will remove the rather old-fashioned fiscal and monetary stimulus gradually, but will not crack down on activity as abruptly and ruthlessly as in 2014/15. As such, the rebound in copper-relevant housing sales/ starts, grid spending and automotive sales, may fade but a collapse in those segments is unlikely. We also note that the scrap market remains tight, with strong anecdotal evidence that copper consumers for instance in Europe are forced to purchase refined metal. Finally, refined copper production has had the weakest start in years, highlighting increased supply discipline.

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