NEW YORK Copper and steel prices should rise over the course of 2013 as Chinese demand rebounds following the countrys leadership transition, according to VTB Capital Plc.
Chinese demand for industrial metals is poised to bounce back over the next six to 12 months after having "bottomed out" during the third quarter of 2012, Wiktor Bielski, the Moscow-based companys global head of commodities research, said at the VTB Capital Investment Forum in New York.
"The underlying data is beginning to look encouraging, particularly an enormous increase in liquidity," he said. "We have the conditions for accelerating growth."
Bielski said that uncertainty related to the Chinese leadership transition delayed some large-scale investment projects, but it was unlikely to be an ongoing concern.
"While there will be a shift towards more consumption-driven policies, they still need more investment in the short term to support urbanization," he said.
However, a pickup in demand will only highlight the lack of readily available material at London Metal Exchange warehouses, with up to 85 percent of metal locked up in financing deals or stuck in queues.
"There will be very little float available when demand picks up again," Bielski said. "So, yes, China will have an impact (on prices) as demand picks up, but thats when these financing deals will start to become more important."
He said that LME warehousing rules are unlikely to change to suit metal consumers, despite the recent purchase of the exchange by Hong Kong Exchanges & Clearing Ltd. (amm.com, Dec. 6). "The problem is (that) the LME is still controlled by producers. There are no consumers on the LME board and nothing in the LME remit to make it do anything friendly to consumers," Bielski said. "No one has broken any rules. There have been opportunities to change the rules ... but nothing has ever happened. So I dont see how this situation is going to change."