Copper Price Has Dropped to Eight-Week Low, Its Potential for an Increase Depends on a Key Factor

Published on: Jun 18, 2024
Author: Amy Liu

China is one of the largest consumer markets for copper. Following weak Chinese economic data indicating a sustained soft demand for copper, the price of copper has fallen to an eight-week low. The price of copper on the London Metal Exchange fell by 1.6% to $9,587 per ton, marking a fourth consecutive week of decline. One trader stated, “Some copper investors re-entered the market to buy in the $9,600-$9,700 price range, but after the release of Chinese data, many investors canceled their buying orders. They are waiting to see if prices will further decline.”

Data released by China on Monday, June 17th, has heightened concerns about disappointing copper demand recovery. While retail sales were strong in May, industrial output and fixed asset investment growth slowed down, exacerbating the stagnation in the housing market.

The Chinese government has implemented various measures to stabilize economic growth and the real estate sector, but the data released on Monday indicated a simultaneous acceleration in real estate investment and property price declines in May.

An analyst at Galaxy Futures Co., a futures company, stated, “Despite a series of loosening policies, the Chinese real estate industry continues to weaken. People have a very pessimistic view of the real estate market.”

Copper prices reached a record high of over $11,000 last month, but due to concerns over increasing global inventories and signs of weakness in China, copper prices quickly retracted. Last week, metal prices were also under pressure as the Federal Reserve lowered expectations for interest rate hikes.

Data shows that due to smelters’ recovery of idle capacity, China’s aluminum production hit a historical high last month, leading to a 1.6% decrease in aluminum prices, hitting a new low in two months, falling below $2,500 per ton.

Analysts from the Bank of America, led by Michael Widmer, noted, “While China has led the growth in production, it is nearing its limits. Smelters are approaching the government-imposed production ceilings. Therefore, the pace of increased production should slow down from this point, limiting the risk of continued oversupply.”

As of 3:38 pm local time, copper prices on the London Metal Exchange fell by 0.9% to $9,655 per ton. Other base metals experienced mixed movements, with aluminum dropping by 0.4% and zinc rising by 2.1%.

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