Copper prices lost ground Tuesday on fears of a demand slowdown from China, the world’s largest consumer of the red metal. According to Jesper Donnesboe, senior raw materials strategist quoted by Bloomberg, copper prices were expected to go up due to declining stocks tracked on the LME (-58% since June).
As a result, copper was down 1.09% to $7,077.20 and down 30% from its high point of $10,190 per tonne in February 2011.
Copper traders are eagerly awaiting the release of China‘s manufacturing purchasing managers index, which is due out next week, said Leon Westgate, a commodities strategist with Standard Bank. “A further drop in new orders could signal reluctance from Chinese fabricators to buy metal, which would put further downward pressure on prices,” he said in a note to clients.
LME copper inventories fell by 3,325 tonnes on Tuesday and are down about 60 percent since last June while stocks in China have increased this year. In another indication that China is amply supplied with copper, domestic physical copper prices have traded at a discount against front-month prices on the Shanghai Futures Exchange this week, reversing a small premium seen earlier in February.
Also, a recent series of disappointing U.S. economic indicators have sparked concerns that the recovery has lost momentum since the end of last year as inclement winter weather weighed on growth. The U.S. is second behind China in global copper demand.
The good news could come from Europe where brighter economic data could give copper prices a boost. The GfK German consumer climate indicator for March rose to a six-year high of 8.5 points, surpassing forecasts of 8.2 points. Meanwhile, the second estimate of fourth-quarter U.K. gross domestic product showed growth of 0.7% on the quarter, matching expectations.