Investors fleeing the copper market are likely to be sidelined for many months, leaving the field clear for physical players who expect demand in top consumer China and elsewhere to deteriorate over coming months and weigh on prices.
However, copper has dropped nearly 20% since as persistently weak manufacturing activity led the physical market to reassert control, with consumers putting purchases on hold and producers and traders delivering surplus metal to LME-registered warehouses. But much of the copper used in China is for wiring in household goods which are then exported. A housing market slump and China’s stagnant manufacturing sector highlight the headwinds copper demand faces.
Data from the International Copper Study Group showed a copper market surplus of 416,000 tons between January and May, laying bare the idea of large deficits this year.