As concerns about global economic growth heated up, the “copper shortage” argument began to falter. Some analysts say that for investors, whether to buy copper depends on their views on the prospects for global economic recovery. If they think the prospects are improving, the current price is a good buying point.
Copper prices continued to plummet due to weakening demand.
On Wednesday, international copper prices closed at a low level for more than three months, and have accumulated a cumulative drop of more than 20% from the record high of 11,100 US dollars/ton set in May. As of press release, Luntong reported 8,991.5 US dollars/ton, down more than 1% during the day.
New York copper also fell more than 1%. As of yesterday, the main New York copper contract had been falling for eight consecutive trading days, setting the record for the longest continuous decline since February 2020.
Domestic copper prices also fell at the same time. Shanghai copper bottomed out and fluctuated on Thursday, marking the longest cycle of decline in history. In the afternoon, the decline in Shanghai Copper's main contract widened to 2%, falling 1,600 yuan during the day to 7,3240 yuan/ton.
In addition, the LMEX Metals Index, which tracks the six major basic metals on the London Stock Exchange, also fell to its lowest level since the beginning of April, falling to the oversold region.
Uncertainty about demand and prospects for economic recovery is increasing
The main factor dragging down copper prices is weak demand prospects.
In the context of the global clean energy transition, the market generally believes that global demand for copper is high, and it is expected that there will be a shortage in the copper market in the next few years — this is the main driving force behind the continuous rise in copper prices.
However, as uncertainty about economic recovery around the world increased, the “copper shortage” argument began to falter. Goldman Sachs analyst Adam Gillard once warned that the situation continues to deteriorate. This is an excess market, and copper prices will fall in the short term.
Jinrui Futures analyst Gong Ming commented:
“Concerns about global economic growth remain, which may drive copper prices lower.”
Some analysts expect that to achieve the goal of close to net zero emissions by 2035, copper demand will need to double from current levels to 50 million tons. Even with conservative estimates, demand will increase by at least one-third over the next ten years, putting pressure on the copper market in the short and long term.
Overnight, technology stocks crashed into the US stock market, and Tesla and Google's unanticipated performance made investors start to worry: demand prospects for copper metals in electric vehicles and artificial intelligence may not be that optimistic.
Hallgarten mining strategist Christopher Ecclestone stated:
“The story of the electric car family used to peddling 'future rich'.”
“The claim that there is a shortage of copper is just a myth. There may be a shortage of copper in the future, but not now.”
“For investors, whether or not to buy copper depends on their views on the prospects for global economic recovery... If they believe that economic conditions will improve in the future, the current price may be a good buying point.”
However, Gong Ming also added that there are also signs of supply risk at present, and copper prices are expected to be supported around 8,900 US dollars.