Falling Copper: Commodity Weakness is Spreading

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Copper fell from $6,100/metric ton on Friday to $5,400/mt yesterday. That is an 11% drop in only 3 trading days.

Copper CME spot price since 2012

CME Copper spot price since 2012. Source: MetalMiner

The move does not come as a surprise to us as we recently pointed out that copper was positioned to fall below $6,000/mt. The size of the move is unpredictable but it was clear that copper buyers should have been enjoying the trend by buying down the market (at least if you subscribe to our reports).

Crude oil CME spot price since 2012

Crude oil CME spot price since 2012. Source: MetalMiner

Now, copper’s movements start to look like those of crude oil, which has fallen more than 55% since July. This should not come as a surprise, either, since we know that commodities move in tandem and they were heading into trouble before oil prices plunged. Heavy weakness in commodities is spreading to industrial metals and Dr. Copper seems to be taking the lead.

Tin and Lead had already dived to new lows at the end of 2014. These two metals are trading at low levels and they could fall sharply in 2015. For metal buyers, the recommended strategy is to ride the down trend.

Aluminum, nickel and zinc are giving up 2014 gains. These metals have stronger fundamentals but general market conditions are dragging them down. They should hold their value better than other metals but buyers might want to think twice before making long-term commitments while commodities are falling sharply.

What This Means For Metal Buyers

As copper sinks, the outlook for industrial metal prices gets darker. Buyers should think twice before buying forward as we might see metal prices getting into big trouble. In a falling market, what looks cheap can become an even bigger bargain. Price volatility is increasing and metal buyers might want to stop guessing and have an action plan.

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