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Copper fell below US$8 000 a ton for the first time this year as the industrial metal takes a hit from China’s lackluster recovery and the prospect of more interest-rate rises in the US.
The red metal has been under pressure as a raft of data in recent weeks has showed the post-virus rebound in China, which consumes around half the world’s copper, is stuttering. Unlike in previous slowdowns, Beijing is depriving metals of a safety net by not deploying any big-ticket spending on infrastructure or property.
The demand weakness is evident in inventories held by the London Metal Exchange, which have almost doubled since mid-April.
The risk of more copper supply is adding to the downward price pressure, said Jiang Hang, head of trading at Yonggang Resources Co. “Prices are going to head even lower.”
Copper fell as much as 1.4 percent to US$7 988 a ton on the LME and traded at US$8 021.5 as of 11:47 a.m. in Shanghai. The metal is down around 11 percent this quarter.
While China is the main source of copper’s troubles, there isn’t much help coming from the US.
The Federal Reserve’s aggressive monetary tightening campaign has undermined demand. Investors had been expecting a pause, but recent comments from officials suggest the central bank may have to keep raising rates.
A key spread is also signalling supply is running well ahead of demand. Copper’s spot price is at a US$66 a ton discount to three-month futures on the LME. That’s the widest contango — when futures trade at a premium to the spot price — in data going back to 1994.
Steep price declines for other metals are also damaging sentiment toward copper, Yonggang’s Jiang said. “The plunge for other metals like zinc has gone far beyond market expectations, which is sending a really bad signal.”
Zinc dropped 1.6 percent to US$2 333.5 a ton on the LME, taking its decline so far this quarter to around 20 percent. Aluminium was down 0.5 percent, falling for a third day. — Bloomberg
Online Reporter