MELBOURNE Copper and zinc are the two standouts among a brightening outlook for base metals, with supply constraints and China-driven demand set to lift prices in coming months, U.S. commodity hedge fund Blenheim Capital Management said.
After a near six-year downturn that bottomed early last year, industrial metals are being driven more by supply and demand fundamentals than global monetary trends, base metals analyst Ingrid Sternby told Reuters in a rare interview.
The famously private Blenheim sees interest in commodities finally picking up and Sternby said there’s now “a good story to tell.”
“We have April ahead of us where usually demand is better. I’d say there is fair chance that we are going to see some better price action ahead. Fundamental stories are promising and I would expect more money coming into the sector,” she said.
New-Jersey based Blenheim is one of the few commodity hedge funds to weather the global financial crisis washout that saw high profile rival funds run by Clive Capital and BlueGold close their doors.
Still, the fund, run for nearly three decades by Willem Kooyker, one of the earliest commodity hedge fund stars, did not sail through the downcycle unscathed. Blenheim does not report assets under management but Bloomberg last March put it assets at $1.5 billion, down by nearly 85 percent since 2011.
Sternby said a rally in copper and zinc prices that stalled in March looks set to resume as an influx of copper scrap into the market fades out and as supply disruptions dent global zinc stocks.
“Copper is probably looking quite affordable at this point in time over a longer term basis,” she said, noting that primary supply will be limited by the long downtrend in the metal that curbed investment in new projects.
“Secondary supply has been a big factor dampening the upside in copper lately. The question is, how sustained is that feed going to be? My understanding is that there has been quite a lot of inventory destocking so it’s more of a one-off.”
For zinc, high prices are likely to trigger more China mine supply and demand may be curbed by an environmental crackdown on China’s steel industry, cutting use for galvanizing, she said.by