In recent weeks, China has continuously made moves to cool down the raw material market, and this effort has worked…
World copper prices fell sharply in Tuesday’s trading session (June 15), to an 8-week low, as speculators worried that China might take action to reduce copper prices and the rally of public metals. This business has gone too far.
Copper prices for July delivery on the London market closed down 4.2 percent to $4.34 per pound, 9% lower than the record set in May. This was the biggest drop in prices. dong since the end of April.
Three-month copper futures on the London Metal Exchange (LME) fell about 4% to $9,553.5 per ton.
Analysts said that the sharp drop in copper prices was due to speculation that the State Reserve of China should plan to gradually discharge its stockpile of copper, aluminum and zinc metals in the coming months. The world’s second-largest economy consumes about half of the world’s refined copper. Investors fear that such a move could be part of a major effort by Beijing to control price escalation.
“The biggest obstacle is China’s ability to slow down inflation and prevent speculation in metals,” said William Adams, head of base metals research at Fastmarkets. “It was certainly an important factor that diverted part of the hot money flowing into the market at the same time.”
Copper has led a strong uptrend in industrial metals this year. Copper’s rise has attracted a lot of attention because copper plays an important role in the global shift away from fossil fuels to clean energy sources. In addition, the world copper supply is also in a tight period because many copper mines have to suspend operations because of Covid-19. Speculative activity and optimistic forecasts about copper prices and institutional investors further heat up the copper price fever.
The price of copper for delivery in 3 months at the London Metal Exchange (LME).
In recent weeks, China has continuously made moves to cool down the raw materials market, and this effort has paid off. To date, copper prices have fallen about $1,000/ton since the all-time high of $10,556/ton set in May.
To prevent an escalation in material prices, Chinese officials expressed concern about the rapid rate of price increases, and vowed to take action to ensure supply and stabilize prices. In addition, businesses have been warned that the authorities will not tolerate market manipulation, speculation and blowing up metal prices.
The decline in copper prices is also due to many investors concerned that the price of copper has risen too quickly, said Julian Kettle, vice president of consulting firm Wood McKenzie. New strains of Covid-19 and continued lockdowns in some countries are posing new risks to the global economic recovery.
“Copper prices have gone up too far, too fast,” Mr. Kettle said. “The fundamentals really don’t warrant the price we’ve seen.”
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