The outlook for copper is "not convincing" enough to sustain a price rebound, with London Metal Exchange open interest waning, VTB Capital analyst Andrey Kryuchenkov said Wednesday.
"This week saw heavy losses for copper, with the red metal erasing early September gains in a single stroke and tumbling towards support at August lows," Kryuchenkov said in a research note.
He noted that persistently disappointing macroeconomic data is weighing on the LME complex, "with slack interest for most metals and specifically for copper, where improving supply side dynamics in the long run go in hand with short-term macro jitters and concerns over Chinese consumption."
Kryuchenkov said the copper outlook is not "convincing enough for market participants to return to the market and support a sustained price rebound. The speculative positioning on COMEX has once again turned negative as net length slipped back below zero."
This implies that the market is betting to the downside.
Kryuchenkov said total LME copper stocks rose in August with more staying in warehouse than leaving it.
Copper stocks in LME-registered warehouses rose 925 mt Wednesday to total 155,625 mt.
But inventory on December 31, 2013 was more than double at 366,425 mt.
Looking for some positives for the copper price, the analyst noted that September has seen some "positive dynamics in Asia, as spot Shanghai premiums gain and domestic stockpiles contract. It will be important to keep an eye on this space for signs of fabricator demand recovering."
According to figures published Friday, China's copper stocks in Shanghai Futures Exchange warehouses fell for the fifth consecutive week, to below 80,000 mt.
Stocks stood at 74,336 mt, down 6.8% on the week.
Three-months copper was spot bid on LMEselect as of 0850 GMT Wednesday at $6,846/mt, from a Tuesday kerb close of $6,840/mt.
