Mikkel Rosenvold
25 weeks ago

Metals Market Faces Potential July Bloodbath, Warns Analyst

In his latest report, Andreas Steno from Steno Research highlights alarming risks in the metals market ahead of July deliveries. With a combination of weak Chinese demand and liquidity shifts, Steno outlines why investors should brace for potential turmoil.
Photo by Epitavi
Photo by Epitavi

In a comprehensive analysis titled "A Blood-Bath in Metals in July!?" Andreas Steno, a renowned analyst at Steno Research, warns of significant risks in the metals market as July approaches. According to Steno, the buildup of copper on Chinese exchanges is a critical factor that could signal major disruptions ahead.

Steno points out that the accumulation of copper reserves on Chinese exchanges might not be the strategic reserve-building that some speculate. "If China really wanted to build up reserves, why isn’t the copper leaving the exchange(s)?" he questions. This accumulation, according to Steno, might be "sending a signal" but also "screams bearish vibes about Chinese end-user demand."

The Chinese construction sector, traditionally a major consumer of copper, remains sluggish with no signs of rebound. Steno highlights that "up to 30% of China’s copper consumption was tied to real estate activity as recently as 2022." He adds, "the building activity in China isn’t bouncing back at all," casting doubt on the optimistic copper narrative held by many in the market.

Adding to the complexity is the overall liquidity environment, which has seen significant fluctuations. Despite expectations that Quantitative Tightening (QT) would dampen liquidity, Steno explains that "the supposed negative liquidity effects of QT programs in the US have been effectively nullified since Q4 2022 thanks to the TGA, the ON RRP, the BTFP, and other liquidity tricks up the Fed’s sleeve." Looking ahead, he notes that "July looks extremely bullish again from a liquidity standpoint."

However, this positive liquidity outlook contrasts sharply with troubling signs of weakening demand. Steno notes that "both US and UK credit card data have been weak through May and early June," which raises concerns about overall consumption trends.

In the commodities market, Steno advises caution, particularly with copper and silver. He notes that "Copper positioning remains outrageously long," and with the anticipated flood of Chinese copper into the market, July could see a sharp correction. He stresses that those who believe in the continued upbeat economic surprises over the summer should expect "the Copper Comex curve to move into extreme contango between July and September deliveries."

For more detailed insights and charts, visit the full article on Steno Research.

Disclaimer

The information provided by this Site is for general informational purposes only. All information on the Site is provided in good faith, however we make no representation or warranty of any kind, express or implied, regarding the accuracy, adequacy, validity, reliability, availability or completeness of any information on the Site.

More News

23 weeks ago Analysis: New Debate Rules Favor Biden New rules announced for the June 27th debate between Joe Biden and Donald Trump serves the President well.
23 weeks ago StanChart Becomes Among the First Global Banks to Launch Spot Crypto Trading StanChart breaks new ground by launching spot trading for Bitcoin and Ether, leading the charge among global banks in the cryptocurrency space.
23 weeks ago Crypto, Currently: June 21, 2024 - Market Bears Down on Major Cryptos Daily update on the five cryptocurrencies, we consider the most interesting right now.
23 weeks ago FX Daily: June 21, 2024 – Forex Market Update Daily update from the foreign exchange markets.
23 weeks ago Amazon Plans To Make Largest Reduction of Plastic Packaging in North America To Date Amazon's response to mounting criticism over its plastic waste with a new reduction plan.
23 weeks ago Ex-OpenAI Chief Scientist Ilya Sutskever Launches New Company Amid Criticism of ChatGPT Parent's Board Appointments Ilya Sutskever, former chief scientist at OpenAI, has co-founded a new company, Safe Superintelligence Inc., amidst ongoing scrutiny of OpenAI’s recent board appointments.
23 weeks ago FX Daily: June 20, 2024 - Mixed Movements in Global Currency Markets Daily update from the foreign exchange markets.