Copper prices dropped on Tuesday following three consecutive sessions of gains, impacted by increasing inventories and sluggish demand from China, the largest consumer of metals.
Despite the decline, copper trimmed some losses after a union source informed Reuters that workers at BHP’s Escondida copper mine in Chile are set to strike due to failed negotiations with the company.
On the London Metal Exchange (LME), three-month copper fell 0.5% to $8,979 per metric ton by 1000 GMT, after gaining 2.9% in the previous three sessions. Copper has dropped 19% since reaching a record high of over $11,100 per ton in May.
LME inventories continued their steep rise on Tuesday, reaching their highest level in nearly five years, having more than doubled in the past two months.
Dan Smith, head of research at Amalgamated Metal Trading, commented, “For copper, this is a fairly negative signal. It raises concerns that the surplus might be larger than anticipated.”
Recent inventory inflows to Asian LME warehouses suggest that China is exporting surplus material, according to traders.
Adding to the concern, recent data revealed a decline in China’s bank loans in July, falling below analyst expectations, which underscores weak demand in the world’s second-largest economy.
However, some of the losses were tempered by reports that some Chinese consumers, including the state grid, were taking advantage of the lower prices to purchase copper, according to a fabricator in China.
Market positioning also played a role, with some speculators selling to secure short-term gains from the recent rally.
Smith noted, “We’re trying to find the bottom for copper. It seems there could be more downside, as these downturns tend to be prolonged, and copper at $9,000 isn’t exactly cheap.”
In other metals, LME zinc and lead saw declines following an increase in LME stocks, with zinc falling 1.5% to $2,701.50 per ton and lead dropping 1.3% to $2,021. LME aluminium rose 0.2% to $2,309 per ton, while nickel slipped 0.3% to $16,305, and tin fell 0.9% to $31,300.
