In February, copper reached an all-time high above $10,000 a tonne. Now, following a 17% slide since early August, it has hit a ten-month low around $8,300. The worrying global economic outlook has dented confidence in copper, which is highly cyclical. But a relatively tight market has prevented it from falling too steeply.
On the supply side, there has been “a perfect storm” of disruptions, says Barclays Capital. Due to technical problems and strikes in major producing countries, production is expected to fall this year. Mines also seem to contain less copper than they used to. Demand for copper has recently improved in China, which accounts for almost 40% of global copper demand. Barclays Capital’s Nicholas Snowdon expects the market to remain in deficit.
However, it’s now clear that both China and India are likely to tighten further, and so “people are worried about whether real demand is going to be there for the remainder of the year”, says one trader. As long as the global macroeconomic environment “continues to darken and sentiment indicators fall, metal prices are likely to remain under pressure”, says Commerzbank. For now, at least, copper look set to fall further.