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As fears over the generic health and appetite of the Chinese market continue to linger, the commodity markets have begun to struggle following the historic growth that they have shown over the last few years. Although the improving condition of the US economy has seen demand increase, this has not been at a fast enough rate to make up for the shortfall in appetite in China. It is calculated that Chinese inventories are currently at a ten-year high; a short-term upturn in demand would be comfortably absorbed by this.
To make matters worse, the world’s second largest copper mine, Grasberg, has recently become active again at Freeport-McMoran’s Indonesian site. It will be interesting to see how long all of the world’s copper mines can continue to run as viable operations with the underlying copper price knocking on the $3 level. Over the last two weeks this has fallen by over 10%, and with a scarcity of news it is difficult to see what will halt the slide, let alone reverse it.
Tomorrow at 3pm (London time) we will have the latest set of US new home sales data. This may help, but it will have to be exceptional in order to break the current bear market hold on the commodity.