It has not been a good week for commodities. While oil’s latest decline was in the spotlight, copper plunged well below $6,000 a tonne for the first time since 2009. That left the Bloomberg Commodity index at a 12-year low.
The ongoing falls in raw-materials prices rattled equities and bonds. US ten-year Treasury yields fell to their lowest level since May 2013 as prices rose. The World Bank added to jitters by trimming its 2015 global growth forecasts.
What the commentators said
Copper prices, unlike oil, are usually driven more by demand than supply, said Josh Noble in the Financial Times. That makes them “a key barometer of global activity”. This slide suggests investors are increasingly worried that the global outlook – and especially in China, whose demand is the key influence on the red metal’s price – is darkening.
All the talk of slumps and falling prices isn’t helping. “There is certainly a deflationary mind-set in the markets,” said Jim Vogel of FTN Financial.
This is “an overreaction” on the part of investors, reckoned Bart Malek of TD Securities. “It’s too early to say the world is falling apart.”
Falling oil prices should boost global growth late this year, agreed Capital Economics, ensuring global GDP growth of 3% in 2015, pretty much the same as last year. And the fall in copper “is still consistent with only a small dip in China’s manufacturing sector, rather than a ‘hard landing’”.
Perhaps, said Deutsche Bank, but don’t expect a turnaround in copper prices any time soon. Supplies look healthy, and the slowdown in Chinese property sales has yet to feed through fully to copper demand. Throw in new Chinese credit restrictions, said Malcolm Freeman of Kingdom Futures, and the current price of $5,800 a tonne looks about right.