Copper price: trading the ‘demand destruction’ in base metals

Copper has just broken the $8,000 level on the London Metal Exchange (LME) and other base metals are following suit.

As IGTV’s Jeremy Naylor explains this level of demand destruction is seeing a short trade win out, not just for copper but many other base metals, including zinc and aluminium.

(Video Transcript)

Massive demand destruction

There appears to be massive demand destruction in base metals.

This is most notably seen in today's session, with Copper having dropped below the $7,000 a tonne level the LME. The LME is the benchmark price for raw copper.

Copper chart

Let's take a look at the price of the copper chart, because as of this moment we're down 26.5% from the highs we had back on the 7th March and we're now trading at 7981.

Now Bloomberg is quoting Wei Lai, an analyst with TF Futures, saying there are mounting concerns about global demand for the metal. The copper market, he said, will face a surplus of about 10% of the total supply in the coming two years based on a situation of a hard landing for the US and European economies.

It doesn't stop there either because the short trade, and if you do go short on this your stock goes above the highest point of today's candle at around about the 8290 level, if you're short on this because this now seems to be having support down here at 7685 which were the lows that we had on this chart here back in February 2021.

Zinc

But it's not just copper, it's other base metals as well.

Look at the way in which Zinc has fallen below support in today's session, now at 3046. Same sort of way to approach this if you're short on this, next price target is down here the lows that we had back in September 2021 and most base metals are having the same sort of story. You can see today we've dipped below this 2424 support for aluminum.

Aluminum now has a price target of 2304 which are the lows we had back on the 24th May. So it certainly seems like base metals are getting beaten up.