Copper has fallen back to six-year lows of around $5,000 a tonne in recent weeks. A sustained recovery looks unlikely. The economy in China, which accounts for 45% of copper demand, has slowed. While short-term stimulus measures may boost demand, China as a whole is set for a structural slowdown as its economic emphasis shifts from investment and infrastructure to consumption, according to Goldman Sachs.
Deutsche Bank thinks Chinese copper demand will grow by an average of 3% a year in the next five years, down from 7.5% in the last five. Other emerging markets won’t take up the slack, says Henry Sanderson in the Financial Times: India, for example, consumes just 2% of copper output.
On the supply side, global copper stocks will amount to 80 days of average consumption by the end of the year, reckons Eleni Joannides of Wood Mackenzie – higher than in 2008-2009. “That oversupply will get worse,” says The Economist. “It takes several years to build a mine, so several firms were caught out when the market turned.” New supply is still hitting the market and stocks may not peak until 2017. So while copper may rebound if sentiment towards emerging markets and commodities improves, it will soon run out of steam.