Copper prices have dropped to a three-month low, marking the most significant weekly slump in nearly two years for base metals. Despite China’s recent efforts to stimulate its economy through interest-rate cuts, concerns about demand in the world’s largest commodities consumer continue to weigh heavily on the market.
Modest Stimulus Measures Fail to Boost Market
Copper prices have fallen for the sixth consecutive day, even as China implemented surprise interest-rate cuts to support the economy. These measures followed investor disappointment from a recent major Communist Party meeting that failed to introduce short-term stimulus. On Sunday, the party released a detailed plan aimed at strengthening local government finances by reallocating more revenue from central coffers. However, according to Ewa Manthey, a commodities strategist at ING Bank NV, these efforts are insufficient without additional stimulus measures. Manthey highlighted that there is little hope for a short-term recovery in the copper-heavy property and construction sectors.
“We expect copper and other industrial metals to decline further in the near term,” Manthey stated. This prediction is based on a softer demand outlook in China, which plays a crucial role in the global commodities market.
Declining Demand and Rising Inventories
The LMEX Index, which tracks six base metals, saw a 5.6% decline in London last week. Copper continued its retreat from a record high reached in May, driven by concerns over weak Chinese demand and increasing global inventories.
Recent data has shown fresh signs of demand weakness in China, as refined copper exports more than doubled in June, surpassing a previous record set in 2012. This rare surge in exports has contributed to the rise in global inventories. Stockpiles at London Metal Exchange (LME) warehouses have more than doubled over the past two months, reaching their highest levels since September 2021.
Copper fell 1% to settle at $9,216.50 per ton on the LME. The decline was not isolated to copper alone; all other metals also saw decreases on the exchange. The market’s reaction underscores the broader concerns about the economic outlook in China and its impact on global commodities.
Market Outlook and Future Predictions
The current market sentiment reflects ongoing concerns about the effectiveness of China’s economic support measures. Investors are closely monitoring for any signs of additional economic policies that could help stabilize prices. However, the outlook remains uncertain, with analysts predicting continued volatility in the coming months.
The pressure on copper and other industrial metals is expected to persist as global inventories rise and demand in China remains weak. The commodities market is particularly sensitive to economic signals from China, given its significant influence on global demand for industrial metals.
The decline in copper prices has broader implications for the global economy. Copper is widely regarded as an economic bellwether, meaning its price movements are often indicative of broader economic trends. The current slump in copper prices suggests that economic growth may be slowing, particularly in key sectors such as construction and manufacturing.
Source: Mining.com
