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Last week, copper’s price fell to a two-month low on rising expectations that China will rein back rising commodity prices and a growing sense that the breakneck rally had overpriced itself, the Wall Street Journal reported.
The price slid 4.2 percent to $4.34 a pound on 15 June. Prices set a record of $10,720 a ton in May and closed at $9,205 last week.
“The biggest headwind is China talking about putting the brakes on inflation and stamping out hoarding of metals and speculation,” William Adams, chief of metals research at Fastmarkets, said to the WSJ. (See related story.)
Regulators have said they will take action against any instances of companies hoarding materials or market manipulating markets, the WSJ said. China’s government also has pledged to take steps to ensure adequate supplies of raw materials and stable prices for the country’s manufacturers.
“That will be a meaningful factor in stamping out some of the hot money that has flowed into the copper market,” Adams noted.
Copper, essential in everything from electric-car motors to home plumbing, is a bellwether of global growth. As economies reopened, copper was in short supply because mines and processors shut down during last year’s crisis.
Speculators, as well as a surge in demand among manufacturers and the construction industry, drove up prices to never-before-seen levels.
“Prices have gone too far too fast,” vice-president Julian Kettle at consulting firm Wood Mackenzie, told the WSJ.
Some countries are slow in lifting their lockdown restrictions as COVID variants make the rounds, hobbling the global economic recovery.
“Fundamentals don’t justify the price we had seen,” Kettle said.
TRENDPOST: We have referred to “Dr. Copper,” because the metal must have a Ph.D. in economics to signal changes in global economic trends so accurately.
Copper, along with most other commodities essential in manufacturing, will remain scarce for the foreseeable future as supplies will continue to struggle to meet swelling demand as the global economy gathers momentum. Those scarcities will keep prices trending higher, despite occasional dips.
As for its scarcity, as reported by MarketWatch, “Inventories, measured in metric tons, now stand at levels seen 15 years ago, “implying that stocks cover just 3.3 weeks of demand,” the strategists said in a BofA Global Research note dated 30 April. The bank’s strategists said prices could jump to $13,000 a metric ton (or $5.89 a pound) in the coming months and are forecasting copper market deficits amid further drops in inventory this year and in 2022.”
“The fundamental backdrop is so concerning because the global economy is just now starting to open up and reflate,” they said. “If scrap supply doesn’t come through, stocks would deplete by 2024.”