Copper MMI® Falls Even Lower As Metal Enters A Perfect Bear Market

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The monthly Copper MMI® registered a value of 66 in September, a decrease of 1.5% from 67 in August.

Copper_Chart_September-2015_FNLThe red metal has done nothing but fall since its peak in 2011. A series of lower highs and lower lows put this metal in what we call a textbook bear market.

Copper downtrend since 2011

Copper’s downtrend since 2011. Source: MetalMiner.

The declines, however, were steeper this year. Investors particularly dislike copper, as worries about China’s economy are rising. 

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China’s stock market crash and the devaluation of its currency are just aggravating copper’s bear market.

Weak demand in the face of a glut of metal keeps driving prices down. China is producing more copper and importing less, weighing on an already oversupplied market. China’s copper imports fell more than 10% this year to date, while its copper production rose 9%.

Manufacturing Demand Plummets

On top of that, China’s manufacturing PMI fell to a more than 6-year low of 47.1 in August. Construction and manufacturing numbers keep giving investors reasons to remain bearish.

With prices at these low levels, according to external sources, 17% of copper mines are producing at a loss. While many producers are aggressively doing all they can to move down the cost curve, others are also cutting production. Glencore PLC recently revealed plans to suspend production at two African mines. That will cut its copper output by nearly a fifth. These facilities will not operate for 18 months while the company builds lower production cost facilities to fight the current low prices.

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Many are arguing that we are close to the bottom of the cycle with copper. However, it could be some time before the demand picture changes or enough capacity is closed to impact prices. As copper has taught us over the past few years, better to wait for the facts than be too early calling for bottom.

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A 4.8% decline for the cash price of primary Japanese copper left it at JPY 652,000 ($5,383) per metric ton. Last month, Korean copper strip prices dropped by 2.8% to $7.27 per kilogram. The 3-month price of copper ended the month on the LME at $5,076 per metric ton, down from $5,076. Last month, the cash price of primary copper dropped 2.4% on the LME to $5,094 per metric ton. The price of US copper producer grade 110 saw a small decline this month, falling from $3.11 to $3.06 per pound. The price of US copper producer grade 102 fell a slight 1.5% over the past month to $3.25 per pound.

The Chinese copper cash price rose 1.6% to $6,342 per metric ton after falling the previous month. After dropping the previous month, the price of Chinese copper wire prices rose 1.2% to $6,171 per metric ton.

Chinese bright copper scrap held pat last month at $5,233 per metric ton.

The Copper MMI® collects and weights 12 global copper metal price points to provide a unique view into copper price trends over a 30-day period. For more information on the Copper MMI®, how it’s calculated or how your company can use the index, please drop us a note at: info (at) agmetalminer (dot) com.

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