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Has copper reached a bottom?

Friday, Mar 14, 2014 - 02:38

Mar.17 - Copper prices are at a four-year low, hit by worries that a Chinese bond default may impact on loan deals which use the metal as collateral and by a slowing Chinese economy. But, as Hayley Platt reports, European users have a rare opportunity to buy at rock bottom prices.

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It's called Dr Copper because it's used in every sector of the economy. From autos to manufacturing, engineering to transport and construction. But recent falls have pushed the price of copper to a four-year low. That's giving European suppliers a rare opportunity to buy at attractive prices. David Stevenson is MD of London-based Columbia Metals, which supplies copper to major industries. SOUNDBITE: David Stephenson, Managing Director, Columbia Metals Ltd, saying (English): "Some customers have got excellent long term visibility over what their own demand is likely to be and they will be very keen to talk to us and fix some longer term contracts. I think the time now for that is a particularly good one because copper is at lows we haven't seen for the last three to four years. So those customers that have got good visibility and good predictions of what they're likely to be making in the future can certainly talk to companies like ours and fix good prices that they can then maintain over the next two to three years." Many of the worries over copper stem from China. It's the world's biggest consumer of copper, accounting for 40 percent of global demand. Over the past six months it's been stock piling large qualities of the red metal. But that's caused concern over its physical scarcity elsewhere in the world. Nic Brown, head of commodities at Natixis believes the cycle is about to turn. SOUNDBITE: Nic Brown, head of commodities, Natixis, saying (English): "China will import less metal over the coming months and therefore there will be more copper available over the coming months to the rest of the world. So we think that the trough in LME stock piles is probably behind us. We expect to see LME stocks rebuilding over the next three to six months. Therefore the market is going to go from worrying about a physical scarcity to beginning to worry about the surplus that we believe is going to be in place for most of the rest of the year." Copper has also been used in large quantities as collateral in financing deals in China. But as the value of copper has fallen, banks are becoming less keen on the practice. Last week saw the country's first domestic bond default. And the possibility there could be more worries for investors. SOUNDBITE: Nic Brown, Head of Commodities, Natixis, saying (English): "I am aware that there are significant concerns in China that some of the metal that is being used as collateral may end up being unwound if some of these transactions get caught up in default." China has lowered its growth target to 7.5 percent from last year's output of 7.7 percent. It wants to concentrate on sustainable growth and greener policies. That, says Brown, should help stimulate growth and assure demand for copper remains constant over the longer term.

Has copper reached a bottom?

Friday, Mar 14, 2014 - 02:38

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