Copper continues slide from recent record as traders fret over China demand
London copper futures fell Wednesday to their lowest in more than two months, extending a slide from an all-time high, as prices face sustained pressure from unusually weak demand in top consumer China.
Copper has slumped 14% since surging to a record $11,100/ton in May, as soft market conditions in China have slapped bullish investors with a reality check, and prices have continued to decline even after tentative signs of a demand recovery.
Consumption in China, which represents about half of global demand estimated at ~26M metric tons this year, has been soft partly due to its troubled property sector and weak manufacturing activity.
Prices will climb again "only if we have a pick-up of demand from China; otherwise, we are set to stay below $10,000," Sucden Financial's Robert Montefusco recently told Reuters. "We need better fundamentals, not just speculative buying."
According to Bloomberg, benchmark copper (HG1:COM) on the London Metal Exchange recently was little changed at $9,550.50/ton after slipping to the lowest level since April 18 in earlier trading.
ETFs: (NYSEARCA:CPER), (NYSEARCA:COPX), (OTC:JJCTF)
Potentially relevant stock tickers include (FCX), (SCCO), (TECK), (BHP), (RIO), (VALE), (ERO), (OTCPK:CSCCF), (OTCPK:FQVLF), (OTCPK:GLCNF), (OTCPK:GLNCY), (OTCQX:AAUKF), (OTCQX:NGLOY)
"The sharp rise of the copper price in May undermined downstream demand, leading to higher inventory," HSBC analysts including Howard Lau wrote. "However, we believe pent-up demand will gradually be released with the price correction seen from mid-June onward."
Although the global copper market was in a surplus for the first four months of the year, analysts say that will change; Citi analysts see copper demand exceeding supply this year, forecasting a deficit of ~600K metric tons over the next three years, and Goldman Sachs anticipates a shortfall approaching 500K tons in 2024 alone.
A supply crunch is not a certainty; for example, if the Cobre Panama mine - which was closed last year after a court ruling - would reopen early next year, it would tip the market into a surplus of 1.8%, Deutsche Bank said.