By Jim Williams
Copper prices plummeted below $4,600 per ton on the London Metal Exchange Tuesday. This is the first time since 2009 the price of copper has seen numbers that low. Experts say the terror attacks in Paris added to investors’ concerns about the global economy.
But the French tragedy isn’t the only thing causing the slump in copper prices. Tuesday’s drop followed Monday’s 3.5-percent decrease as part of a significant sell-off on the Shanghai Futures Exchange. Since May, the red metal has lost almost 25 percent of its value, thanks to the increasing strength of the U.S. dollar and decreasing demand in China.
The chief executive of one of the country’s largest buyers says China is facing an unprecedented decline in refined copper imports as a slowing economy erodes demand in the world’s biggest consumer. Stephen Huang, chief executive officer of trading house Arc Resources Co., predicts shipments will shrink 10 percent in 2016 as consumption weakens, domestic supplies increase and less metal is used for collateral in financing.
“We’ll see a substantial change in sourcing structure next year as users buy more from domestic producers and less from foreign suppliers,” he said. Huang made his comments ahead of Asia Copper Week in Shanghai, where producers, traders and buyers are meeting to discuss the industry.
“We expect copper to improve,” said Eugen Weinberg, head of commodities research at Commerzbank. “The effects will be seen in tighter supply and demand situation going forward.”
“In our view, though, the weakness in copper is overdone,” Julian Jessop, chief global economist at the Capital Economics consultancy, said in a note to clients. “For a start, despite the recent slump, the Shanghai index is still up 18% year-to-date and is 84% higher than this time in 2014. The wider economic fall-out is therefore likely to be limited.
“We remain positive on the prices of most industrial metals and copper in particular. We have already lowered a number of our forecasts this month to reflect the lower starting point. But our new end-2015 forecast for copper, at $6,250 per ton, is still relatively upbeat, and we continue to expect a further recovery, to $7,000, by end-2016,” Jessop continued.
Further Reading:
China’s Copper Imports Witness Slump
China Economy: Copper and Japan – Two Chinese Economic Indicators
Tagged with China, copper, Fed, tED