Copper Prices Decline Amid Rising Inventories and Weak Demand from China
Copper prices fell on Tuesday, halting three consecutive sessions of gains due to increasing inventories and tepid demand from China, the largest consumer of metals. The decline was moderated by news of an impending strike at BHP's Escondida copper mine in Chile, after union negotiations failed.
As of 1000 GMT, three-month copper on the London Metal Exchange (LME) dropped 0.5% to $8,979 per metric ton, following a 2.9% increase over the previous three sessions. Copper prices have decreased by 19% since reaching an all-time high of over $11,100 per ton in May.
LME copper inventories have surged, reaching their highest levels in nearly five years, more than doubling over the last two months. This sharp rise in stockpiles suggests a possible surplus, causing concern among traders. Recent inventory inflows to Asian LME warehouses indicate that China is exporting excess material, further contributing to the pressure on prices.
Economic data from China has added to the worries, with reports showing a month-on-month decline in bank loans for July, falling short of analyst expectations and underscoring weak demand in the country. However, some physical consumers in China, including the state grid, are taking advantage of the recent price dip to make purchases.
Market dynamics also played a role in the price movement, as some speculators sold to secure short-term gains from the recent price rebound. "We're trying to figure out where the floor is for copper. I sense we could see a bit more downside. These wash-outs tend to run a long way and copper at $9,000 is not particularly cheap," said Dan Smith, head of research at Amalgamated Metal Trading.
Other metals experienced mixed results: LME zinc fell 1.5% to $2,701.50 per ton, and lead dropped 1.3% to $2,021 due to increased LME stock arrivals. In contrast, LME aluminum rose 0.2% to $2,309 per ton, nickel slipped 0.3% to $16,305, and tin decreased by 0.9% to $31,300.
