Copper reached a cyclical turning point in 2016 with mine supply growth expected to slow from next year and rising prices likely supported by a fragile but broader-based recovery in China's economy, fund managers said on Thursday. "If we think next year will be the start of a low growth cycle in terms of mine supply, then the copper turning point will happen this year," said Haihua Shen, senior portfolio manager at HFZ Capital Management in Hong Kong, speaking at an industry gathering in Shanghai.
"We think this year is a year of change," said Shen.
The consensus for copper mine supply growth for next year is 1 percent, flattening out after that due to a lack of capital spending on new projects by miners, he told delegates to Metal Bulletin's Cesco conference. Copper prices punched through $6,000 last week, in the biggest weekly gain since 2011. London Metal Exchange copper traded down 0.8 percent at $5388 a tonne on Thursday.
Donghai Xie, chairman of Entropy Capital, agreed that copper prices had bottomed this year due to better supply-side fundamentals. But, speaking to Reuters on the sidelines of the conference, he warned copper may yet face headwinds due to the impact of a stronger dollar.
Fund officials at the conference this week have said that most established China and Western hedge funds did not participate in last week's huge rally. Instead, they said, it was driven by Chinese retail investors and short covering. But that could change next year as larger Western generalist investment funds which are underweight in commodities increase their allocations to catch up with the broad-based rally in the sector this year.