November 30, 2017 / 10:30 AM / in a year

China rising output may threaten copper's electric vehicle-fuelled rally

* Chaos International Standard Chartered see lower copper prices

* Property market, rising output expected to pressure prices

* Copper topped $7,000/t this week on hopes for EV revolution

SHANGHAI, Nov 30 (Reuters) - China’s rising copper output and concerns of a slowdown in its real estate market may lead investors to exit big bullish bets in the copper market, leading to a double-digit percentage drop in prices, executives said on Thursday.

“In the first half of 2018, we’ll see pressure because of the weakening of the real estate market,” said Chaos Investment base metals chief Qian Zhou in a panel discussion at the Asia Copper conference. “We expect a V-shaped trajectory.”

Standard Chartered Bank expects softer copper prices in the first quarter as 300,000 tonnes of new metal supply comes on stream and demand deteriorates because of a property slowdown as Beijing continues to cool an over-heated market, said Adam Gillard, who works on commodity hedge fund sales at the bank.

The comments suggest that the buying spree that pushed copper prices to multi-year highs in Shanghai and London over the past month may be overdone. Investors have added bullish bets on expectations of soaring long-term demand from the predicted expansion of electric vehicle (EV) production.

China is the world’s largest copper user.

Any pressure on prices could force Chinese speculators to unwind bullish bets worth billions of dollars they have built up over the past month, which would accelerate any sell-off and price drop.

“The largest risk to copper in the first quarter will be if it moves to $6,500 or $6,400. That’ll test the dominant longs in the market,” said Gillard who was speaking on the same panel.

The bank estimates the speculators bought their positions around those levels.

“Should copper move lower because of higher refined production, then we think there’s a possibility for a move lower to $6,000,” he said. That would equate to a 14 percent drop in prices from current levels.

The scale of the selling could be similar to the sudden liquidation in aluminium this month as investors exited bullish bets made in expectation of supply shortages because of the Chinese government’s orders to cut output as part of its clean air campaign, executives said.

Aluminium prices have fallen 7 percent so far this month, on track for their worst monthly performance since May 2016, amid doubts over the scale and pace of those closures.

“In recent years, traders have been speculating on policies and that’s why we’ve seen more money and volatility (in metals prices),” Zhou.

“I think next year there will be less money on the table.” (Reporting by Josephine Mason; Editing by Christian Schmollinger)

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