Log in
Forgot password ?
Become a member for free
Sign up
Sign up
Dynamic quotes 

4-Traders Homepage  >  Commodities  >  LME Zinc Cash       

Mes dernières consult.
Most popular
News SummaryAll newsTweets

China Congress Meeting Key for Metal Prices -- Third-Quarter Report

share with twitter share with LinkedIn share with facebook
share via e-mail
09/30/2017 | 11:14am CET
By David Hodari 

The price at which industrial metals such as copper and zinc will trade for the rest of this year will likely be set in October, at the Chinese Communist Party's National Congress.

Optimism over Chinese economic growth helped power metals to multiyear highs in early September, but prices have since given up some of those gains, as the dollar perked up and investors questioned whether demand would be enough to justify the rally.

Now market players will be monitoring the twice-a-decade congress, where the China's governing body is expected to lay out its economic aims and growth forecasts for the year ahead.

China consumes about half of global metal production, and some analysts are concerned that top party officials could cut the country's growth target.

"The key issues the market will be watching for at the congress will be to see if [President Xi Jinping] lowers China's growth target below 6.5%" and whether he will further reduce capacity of metals smelters, said Robin Bhar, head of metals research at Société Générale.

In February, the Chinese government announced a raft of environmentally driven regulations aimed at limiting the smog that plagues the country's cities during the winter. Those directives included cuts to the capacity of metals smelters, and they have been a major factor in pushing up base metals prices -- especially those of aluminum and zinc.

China's GDP growth target is seen as a proxy for the health of the country's construction and autos industries, both of which use large amounts of base metals.

A cut to China's growth target would come in the wake of a recent spate of lackluster economic data. Chinese growth decelerated for a second consecutive month in August, and it was on course for a 0.2% deceleration in the third quarter of 2017 from the year's first two.

Key activity indicators -- such as industrial production, fixed-asset investment and retail sales -- all slipped more than expected in August, Morgan Stanley said in a note.

For some analysts, metals had already traded beyond the fundamentals that should set their price. London Metal Exchange copper futures gained 10.5% between the end of July and Sept. 7, while over the same period, aluminum gained by 10.2% and zinc rose 12%.

"We see slowing growth in China towards the end of the year and lower prices for most of the base metals complex," said Caroline Bain, senior commodities economist at Capital Economics.

Capital Economics predicts that copper will end this year at $5,800 a ton, a drop of more than 10% from its price Friday. French banks BNP Paribas and Société Générale also have bearish price targets: Both predict further drops of at least 4%.

Some analysts also don't believe that China will follow through on cutting production capacity.

"The way things often work is that policies like this one have one angle which conflicts with the growth objective of another policy," said Nitesh Shah, a commodities strategist at ETF Securities.

"You might get a shifting of capacity from one smelter to another -- production may pop up elsewhere at another, more efficient smelter," he added, which would leave production mostly unchanged and weigh on prices.

The recent resurgence in the dollar is magnifying concerns over base metals, as a rise in the currency -- in which they are priced -- makes them more expensive.

Write to David Hodari at [email protected]

Stocks mentioned in the article
ChangeLast1st jan.
LME COPPER CASH -0.11% 6784 End-of-day quote.-5.53%
share with twitter share with LinkedIn share with facebook
share via e-mail
Latest news on LME ZINC CASH
03/20GLENCORE : Doubles Down on Coal With $1.7 Billion Australian Investment -- Updat..
03/20Rio Tinto to Reduce Debt With $2.25 Billion Bond Purchase, Redemption Plan
03/20Glencore Buys Rio Tinto Interest in Hail Creek, Valeria Resource, for $1.7 Bi..
03/09RIO TINTO : Last Coal Mines Could Fetch as Much as $2.5 Billion -Reuters
03/02Rio Tinto Urged to Disclose Relationship With Lobby Groups
03/02RIO TINTO : Ore Reserves Fall at Argyle, Boron; Increase at Pilbara
03/02Australia Regulator Starts Legal Action Against Rio Tinto, Former Executives ..
03/02Australia Regulator Starts Legal Action Against Rio Tinto Over Mozambique Ass..
02/26Rio Tinto Receives $345 Million Offer From Norsk Hydro for Aluminum Assets
02/21Glencore Sees Benefit From Growing Electric Vehicle Demand -- Commodity Comme..
More news
Duration : Period :
LME Zinc Cash Technical Analysis Chart | 4-Traders
Technical analysis trends LME ZINC CASH
Short TermMid-TermLong Term