Copper prices have so far resisted the sharp fall in other metals prices since the outbreak of the crisis in the euro zone last year. But they are now below the $8,000 per tonne threshold. The copper cycle, which lasted for more than ten years now, might have reached its end.
Usually October is the beginning of a good period for purchases of copper in China, which typically continues throughout the fourth quarter. But this is not the case this year. Physical demand is low, to the point that the copper spot price in Chinese ports is less than the copper price in Shanghai, a very rare phenomenon. The Chinese industry – China represents 40% of world consumption – is not buying anymore and is just using its current copper stocks. In the USA, the recovery is very slow and in Europe, there is virtually no transaction…
Global demand is decreasing sharply after rising 30% per year over the last ten years. This explains why copper prices are set to continue trending downwards in 2013 as the ongoing slowdown in China crimps demand, while increased supply and high warehouse stocks will put further pressure on the market.
Last year copper prices remained high, compared with other base metals and despite the European crisis, because of a lack of supply of ore. But the picture is changing on the supply side too. Many mine expansions or new projects which started during the mining groups huge profit years, are gradually coming into production. The International Copper Study Group anticipates global copper surplus to be half a million tonnes at the end of next year, a surplus that could last until 2018.
All these factors points towards the end of the copper cycle.