Copper to see new lows in Q4 - Barclays

Risks to Chinese growth coupled with increasing copper mine supply could lead the price to new lows in the fourth quarter, according to Barclays Capital. "China is in a period of 'new normal' economic growth, which means base metals consumption will be slower and recoveries probably shorter and shallower," the bank said a note. The recent liquidity tightening is another downside risk to growth and metals demand, while mine supply is expected to be much stronger, according to the bank. "Indeed, our economists have cautioned that implementation of the new government's agenda of no stimulus, deleveraging and structural reform means there is an increasing downside that China could experience a temporary hard landing in the next three years." Copper mine production rose 11% year-on-year in the first quarter, according to figures from the International Copper Study Group ( ICSG). Barclays expects this rate to have slowed down in the second quarter due to disruptions. The expected surplus this year is being driven more by strong supply than weak demand, according to the bank. The market was quick to price in downgrades to the Chinese growth outlook into the base metals, according to Barclays. "It is somewhat ironic that this is happening while apparent consumption numbers are stronger than they have been for some time, with copper and aluminium apparent consumption up about 10% y/y in the year to May." Copper closed Friday at US$3.062/lb cash on the London Metal Exchange, slightly up from the previous day's US$3.042/lb. Copper averaged US$3.177/lb in June and is averaging US$3.420/lb so far this year.