Chinese Analysts Bearish towards December Copper Market

BEIJING (SMM): Although the interest rate cut announced by China's central bank last Friday with an aim to ease funding problems with Chinese companies drove a rally in copper prices the same night, analysts are far from optimistic about copper market outlook in December.

“It appeared that the impact of China’s interest rate cut was limited,” an analyst from CIFCO told SMM. He pointed out that the one-year loan prime rate only dropped 20 basis points on Monday, a reflection that commercial banks were unwilling to lower lending rate as it may hurt their profits. In response, copper prices have surrendered most of their gains.

The same analyst also noted that the US dollar will remain strong given expectation for Fed’s interest rate hike next year, which will also pressure copper prices.

“With the European Central Bank introducing more accommodative policies, the US dollar will continue to strengthen,” an analyst from Nanzheng Futures also expressed gloomy prediction while interviewed by SMM.

“What’s worse,” he added, “the rising copper inventories and continuous drops in gold and rebar will add to a drag on copper, so it remains possible that copper prices will fall even faster in December.”

“Copper prices are also confronted with technical resistance”, a Chief Economist at COFCO Futures said in a recent interview.

“LME copper is expected to meet resistance at $6,750 per tonne, and may drop below $6,500 per tonne once extending losses, and we see the February copper on SHFE to fall below 46,000 yuan per tonne as support at this level is too fragile,” he told SMM.

Courtesy: www.metal.com