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Copper Nears Six-Year Low – AGAIN!

By Jim Williams

Another week, another monumental drop in the price of copper. While the red metal dropped only 0.3 percent Tuesday, it still marks the sixth straight session where copper moved lower and pushed the price to $4,944 a ton, slightly above the 6-year closing low of $4,920.

This recent drop is credited to more bad economic news out of China. Less than stellar inflation data fueled fears about weakening demand from China and increased concerns that commodities will suffer as the U.S. appears set to tighten money policy.

Data released earlier showed that consumer prices in China rose 1.3 percent last month, below expectations of 1.5 percent and down from 1.6 percent in September.

Chinese producer prices declined 5.9 percent in October, the 44th straight monthly decline – matching the worst reading since October 2009.

These latest reports followed disappointing Chinese trade figures over the weekend where exports fell 6.9 percent from a year earlier in October, down for a fourth month. Imports also plunged 18.8 percent, leaving China with a record-high trade surplus of $61.6 billion.

The disappointing reports reinforced the view that the economy remains embroiled in a gradual slowdown. Experts predict policymakers in Beijing will need to roll out more measures to boost growth in coming months.

“Commodities are under pressure, the entire copper futures curve has shifted lower, December contract trades near record low of $2.20 per pound. A slide below this level is expected to add further pressure on mining stocks,” writes Ipek Ozkardeskaya, market analyst at London Capital Group.

According to Bank of America Merrill Lynch, China’s imports of copper are likely to fall on both slower demand growth and rising domestic refined production. A stabilization of Chinese growth in the second half of this year may support prices, but miners need to cut their output to rebalance the market. Though a small copper surplus is still likely for both this year and next, they add.

Investors are waiting patiently for today’s data on Chinese industrial production, retail sales and fixed asset investment for further hints on the strength of the world’s second-largest economy.

The markets are also looking ahead to key U.S. data later in the week for further indications on the strength of the economy and the likelihood of a near-term rate hike. The U.S. is scheduled to release data on retail sales, producer prices and consumer sentiment on Friday.

 

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