Copper weakness set to continue

Fresh weakness in Chinese figures has leant further negativity to an already demoralised copper market.

The noises coming out of China have been increasingly less confident in terms of the country’s outlook for the future, as a number of economic releases have undershot expectations. This morning’s Chinese industrial production figures of 8.6%, missing the 9.5% target, are another case in hand. China accounts for roughly 40% of the global demand in the base metal, so it is unsurprising that the spot price is so prone to changes in Chinese sentiment or demand.

At the moment, it is the markets opinion that there is a large stockpile of excess metal in China, with even government figures inferring that inventories have been rising as credit becomes squeezed. Recovery in the EU is still at a fragile phase, and the instability caused by the ongoing Russian and Ukrainian disagreements is not helping to improve the manufacturing sector’s sentiment and demand. The US markets, the other large consumer, are further down the road to recovery. However, unseasonably bad weather conditions on the eastern seaboard have, for the short-term, derailed demand.

A look at the spot price shows high grade copper as being oversold. Historically they have proven to become even more so, but there does not appear to be many reasons to brave the markets just yet.

High grade copper chart

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