China's Green Shoots Don't Sway One of Its Top Copper Traders

(Bloomberg) -- The green shoots emerging from China’s economy haven’t convinced one of the nation’s top copper traders that a sustained upturn in demand is in place.

It’s too early to become bullish on Chinese growth, which still holds “a lot of uncertainties,” according to Shengzhang Luo, general manager of Jinchuanmaike Metal Resources Co., who forecasts a range for the metal this year that suggests prices have more room to fall then they do to rise.

The country’s liquidity boost “hasn’t flown to the real economy yet,” Luo said in an interview at the company’s headquarters in Shanghai last month ahead of the May holidays. “The economy itself also lacks new growth engines,” he said, and will likely remain choppy this year as the government eases and accelerates stimulus measures to manage growth.

The last two Chinese factory PMIs have shown an expansion, although the April figure missed expectations, while a gauge of credit growth surged in March. The data has indicated enough of a rebound to tempt some bullish predictions on prices, with Citigroup Inc. in April raising its three-month target to $7,000 a ton from $6,700 on a recovery in Chinese demand and the prospect of a trade deal with the U.S.

However, Luo, a veteran trader with almost 25 years in the business, sees prices fluctuating between $5,800 and $6,600 a ton this year. The metal in London was last at $6,236 a ton.

He’s more cautious than he was last year, when he said that China’s copper consumption, which accounts for more than half of the world’s total, was holding up despite a slowing economy. “We haven’t reached a conclusion on the demand growth outlook for this year yet,” he said “It requires more time to observe. Demand was quite good in the first quarter, but it is falling in April from March.”

For Luo’s previous takes on copper’s outlook, read here:
One of China’s Biggest Metals Traders Still Believes in Copper
China’s Jinmai Resources Favors Copper as Demand Remains Intact

Other industry chiefs have also expressed caution. Jiangxi Copper Co.’s Vice General Manager Chen Yunian said at the end of March that the usual spring demand recovery had been slower than expected amid U.S. trade frictions.

©2019 Bloomberg L.P.