All Eye's Are On Copper, A Serious Bellwether To Watch

April 11th, 2012
in Gary's blogging, midday post

Although Reuters reported earlier in the month that China's demand for copper would grow by at least 6% in 2012 according to Wei Jianghong, chairman of Tongling Nonferrous Metals, seems to be an optimistic piece of disinformation the countries leaders are known for. It seems there is more to the story as the 'facts' say otherwise.

Copper slipped on Tuesday and again today to further the fears of China's economy slipping and creating a negative issue for the US and European markets. Although copper prices are not as low as the October lows in 2011 of 3.10 the downward trend of the past several sessions is still disturbing and warning of potentially more weakness to come. Adding to investors fears are several Chinese companies have missed their earnings targets as reported in the Financial times recently “as bleak demand expectations from Chinese copper consumers also discouraged buying”.

Follow up:

Copper May Decline for Third Session on Chinese Demand Concern

Copper may fall for a third session in New York on concern about the strength of demand in China, the world’s biggest consumer of the metal. Figures due April 13 may show China’s economy weakened from a year earlier in the first quarter, a Bloomberg News survey of economists indicated.

Copper broke yesterday below important support levels,” William Adams, an analyst at in London, said by phone. “The overall view is that things are slowing down again.”

Copper falls again as economic hopes dim, gold up

Copper prices are ending lower again as more signs of trouble in Europe's debt crisis sent stock markets plunging on both sides of the Atlantic. Copper fell 7 cents, or 1.9 percent, to $3.65 a pound Tuesday. It also lost 2 percent the day before.

The latest worry for copper was a spike in Spain's borrowing costs.

That led investors to dump stocks in Europe and the U.S. and drive money into safe harbor investments like the dollar, Treasury's and German bonds. Copper, which has a huge variety of uses in construction and manufacturing, also sank because its price is closely tied to economic growth around the globe.”

This morning copper was trading in the 3.63 range while investors are still getting over yesterday's general market weakness and decline. The European continuing financial woes are apparently adding to concerns that falling copper prices are just the beginning of a weakening Euro. Not helping the matter is the uncertainty of Spain, Italy, Portugal and Greece being able to remain solvent.

Copper was trading as low as 3.63 this morning and is currently at 3.6550.


Copper Another Victim of China Worries -

Copper futures sank amid worries that higher energy prices could sap global economic growth and on renewed concerns about China's economic slowdown.

China is the world's largest consumer of both iron ore and copper, two raw materials necessary for construction and manufacturing. Investors have been increasingly concerned that Beijing's tight credit policies will trigger a so-called "hard landing" where business activity stalls.

"That's not good for copper consumption either," said Sterling Smith, an analyst with Country Hedging. "We're probably overpriced compared to where demand should be and at this point I wouldn't be surprised if we came back to the $3.40 level.

However, some market watchers said the sharp decline in copper prices was overdone, as the easing demand for iron ore was an expected side effect of China's tightening measures.

"These statements should be seen in the context of the lower growth target set by the Chinese government, and in our view should not come as any great surprise to the market," said analysts at Commerzbank. “


Recent data from Ernst & Young suggests that economic growth in China is indeed slowing. They add that “Industrial value-added output was up by 11.4% year on year in real terms in January-February – its slowest rate of growth in two years.”

Underscoring the increasingly weak situation in China is the YoY growth of only 7.6% of electrical generation in the first two months of 2012. points out “as the downtrend in GDP growth intensifies in 2012, we expect that the growth rate of power consumption wills low from an estimated 11.1% in 2011 to 7.6% (below the 8.5% to 10.5% rate indicated by the Chinese authorities).”

Ernst & young also points out that two important sectors, cement production and car retailing have both performed poorly in recent months along with rising inventories of copper.

Copper up in thin volume; slow China demand weighs

NEW YORK/LONDON (Reuters) - Copper edged up on Wednesday [2012-04-10], recovering a fraction of the prior day's steep 2-percent drop, as evidence of slowing Chinese demand for commodities underscored recent market concerns and kept most industrial metal prices in a holding pattern.

Another day of lighter-than-usual trading volume reflected the copper market's indecision about just how deep a slowdown China's economy will face and to what extent demand for industrial metals will be impacted.

Copper demand from China, which accounts for about 40 percent of global consumption, has been slow to pick up after the Lunar New Year, raising worries that prices could retreat sharply. Imports of refined copper into China had soared to a record of 406,937 tonnes in December from a year earlier, but the rate of inflows have slowed since then.”


The bottom line is that there will be some excellent opportunities regarding copper in the future, but not today.

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Written by Gary

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