COM - Copper slumps near six-month lows; key spread at widest in 30 years

2023-05-23 07:30:45 ET

Copper prices extend their protracted decline, nearing six-month lows on Tuesday and trading closer to the key $8,000/ton threshold, a reflection of growing concerns about the global economy and the realization that China's recovery has not sparked the expected boost in demand.

Instead, the improvement in China, a top buyer of commodities, has been driven mostly by consumer spending while manufacturing continues to lag.

Additionally, copper inventories in London Metal Exchange warehouses have nearly doubled in the past month, with stockpiles expanding for the past 21 days, the longest run of increases since 2013.

According to Reuters , three month copper ( HG1:COM ) on the LME recently traded -1.1% to $8,041/metric ton after hitting its weakest level since November 29; also, the most-traded July copper contract on the Shanghai Futures Exchange was -1.4% to 64,220 yuan/ton ($9,290.95).

ETFs: ( NYSEARCA: COPX ), ( NYSEARCA: CPER ), ( JJC ), ( JJCTF )

Potentially relevant stock tickers include ( FCX ), ( SCCO ), ( TECK ), ( HBM ), ( BHP ), ( RIO ), ( VALE )

Indicating the possibility of prices continuing lower, the cash-three month spread on the LME has tumbled further into contango, with the copper spot metal more than $60/ton cheaper than benchmark three-month prices in the widest gap in data going back to 1994.

Goldman Sachs has cut its average copper price forecast for this year to $8,698/ton from $9,750/ton previously, although with upside in H2.

Last week, new data on the Chinese property market showed slowing growth in home prices, reinforcing the consensus that optimism around China's economic reopening is fading .

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