Copper Data Support Bearish View - TheStreet

Copper Data Support Bearish View

The latest data on copper supply and demand confirm our bearish view for the metal.
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NEW YORK (TheStreet) -- Recent data on copper support our bearish outlook for the metal.

The supply of copper outstripped demand during the first four months of this year, according to the latest data released by the World Bureau of Metal Statistics. The surplus of 177,000 tons was a marked increase from the surplus of 59,900 tons for the same period a year before.

We have been bearish on the outlook of copper for more than a month. After

our report on copper oversupply on May 26

, the price of copper fell 10% in two weeks, although last week's rally helped it recover some of those losses. Copper for delivery within three months was down 2.1% at $6,510 per metric ton in early hours of trading on the London Metal Exchange Thursday.

Moreover, U.S. housing starts declined 10% in May, the biggest fall since March 2009, according to data released Wednesday. Also, building permits, a sign of future construction, declined to a one-year low. Copper demand is primarily based upon construction activity. Any such news flow will have a negative impact on copper prices.

Last week, we also gave

our view on the stocks

of copper producers

Freeport-McMoRan Copper & Gold

(FCX) - Get Report


Southern Copper

(SCCO) - Get Report

, saying that the selloff in these stocks was overdone. These stocks have gained 14% and 18%, respectively, since then.

Turning to other metals, the latest data released by the World Bureau of Metal Statistics show that aluminum, lead and zinc had a surplus of supply vs. demand, although nickel had a deficit.

Aluminum had a surplus of 295,000 tons, down from 905,000 tons. Lead had a surplus of 49,200, up a whopping 884% from the year-earlier period. Zinc had a surplus of 288,000 tons, up 332%. Nickel was the only metal with a deficit, of 16,000 tons.

Zinc, the worst performing metal this year, lost 4.2% to $1,752 per ton in the early hours of trading on the LME. The metal has lost 29% this year. Zinc inventories maintained by Shanghai Futures Exchange increased 14% to 295,234 tons in May from 259,197 tons in April. They were up 255% from a year ago. LME inventories were up 12% month over month in May at 619,000 tons.

We have a bearish outlook on zinc through 2010


Aluminum for delivery within three months was trading down 1.7% at $1,971.25 per ton on the LME. The metal has lost 12% this year. Japan has been importing the metal at a rapid pace. Aluminum imports to the nation increased 24% to 436,000 tons during the first quarter of 2010.