Hedge funds cut bullish copper bets by the most in a month on concern that a supply surplus will return as demand growth slackens in Europe and China.
Money managers trimmed their net-long position by 24% to a four-week low. A probe into inventories in China spurred speculation that imports by the biggest consuming nation will drop, while the European Central Bank took unprecedented steps to combat deflation. Barclays Plc anticipates that global supply will outpace demand from the fourth quarter.
Prices retreated 11% this year, the most among the 24 commodities tracked by the Standard & Poor’s GSCI Spot Index. The amount of copper stored in China’s bonded warehouses is at the highest since at least 2008, according to data compiled by Bloomberg Industries. This year’s global glut will expand more in 2015, Societe Generale says.
“There is a lot of excess supply for industrial metals,” Rob Haworth, a senior investment strategist at U.S. Bank Wealth Management, which manages $120 billion, said on June 5. “We need enough demand to absorb that supply before we get back, probably late this year, into a more bullish market condition.”
Copper futures fell 2.3% last week in New York, the most since March. The GSCI Index slid 0.5%, led by losses in soybeans, coffee and sugar. The MSCI All-Country World Index of equities rose 1.2%. The Bloomberg Treasury Bond Index lost 0.6%. Copper for July delivery fell 0.7% to $3.0295 a pound at 9:18 a.m. on the Comex today.
The net-long position in copper fell to 16,240 futures and options contracts in the week ended June 3, U.S. Commodity Futures Trading Commission data show. Short holdings betting on a drop climbed 1.5%, the first gain in four weeks.
China’s Qingdao Port is counting stockpiles of industrial metals to determine if they match the amount in documents pledged to banks as collateral for loans, three people with direct knowledge of the probe said last week. Macquarie Group Ltd. said any curbs in lending may weigh on prices.
Imports of unwrought copper into China fell to 380,000 metric tons in May, from 450,000 tons a month earlier, the customs agency said yesterday.
Home prices in China fell in May for the first time since June 2012, according to SouFun Holdings Ltd., the country’s biggest real-estate website owner. More than 60% of the nation’s copperconsumption comes from property and property- related sectors, Goldman Sachs Group Inc. said May 7.
Euro-area economic growth slowed in the first quarter, the European Union said June 4. The ECB last week became the first major central bank to take one of its main rates negative as it battles a prolonged period of low inflation that is threatening expansion. Barclays expects Europe to consume 1.8% more copper this year, less than half the global pace.
Improving industrial activity will help support prices, Frances Hudson, an Edinburgh-based global thematic strategist at Standard Life Investments Ltd., which oversees $305 billion, said June 5.
China’s manufacturing expanded in May at the fastest pace in five months, an official Purchasing Managers’ Index showed June 1. While SocGen is forecasting surplus copper supplies, the bank cut its 2014 estimate by 40% last week, citing a strengthening global expansion.
“The view on copper is more positive because China’s PMI has picked up a little bit,” Hudson said.