What’s copper demand like in China, the world’s largest consumer? If the volume flooding warehouses in Asia is any indication, then copper prices could be weighed down as a result of that apparent demand.
According to a report from the Financial Times, copper currently residing in warehouses licensed by the London Metal Exchange (LME) has climbed by 18% over the past week, the highest level since February.
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This tidal wave of copper could weigh on prices, which recently closed in on a two-month high of nearly $5,000 per metric ton due in part to expectations of further economic stimulus from central banks.
“It’s certainly a sign the market is struggling to absorb all of the supply coming to it,” Matthew Wonnacott, analyst at consultancy CRU in Hong Kong, told Financial Times. “Partly because supply is good but demand is not that great either.”
Chinese copper exports
Our own Raul de Frutos wrote recently that Chinese copper exports spiked as much as 256% in May this year when compared to the prior year. This causes some concern about domestic demand with production also rising significantly, up 7% year-over-year in May.
de Frutos added: “Along with the LME copper inventory, bonded copper stocks held in free trade zones in China have climbed this year. Higher inventory levels are, perhaps, limiting the upside potential of copper prices. Although copper rose in June, the outlook remains neutral and, due to all of this uncertainty, we could continue to see choppy price action in the coming months.”
You can find a more in-depth copper price forecast and outlook in our brand new Monthly Metal Buying Outlook report. Check it out to receive short- and long-term buying strategies with specific price thresholds.
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