Copper closed significantly lower this week after China released new indicators pointing to an economic slowdown.
The metal attempted a recovery after the People’s Bank of China (PBoC) cut interest rates to stimulate local demand, but the incentive seemed insufficient in the face of the negative outlook in the real estate and infrastructure sectors. On the Comex, the division for metals at the New York Mercantile Exchange (Nymex), copper with delivery scheduled for October fell by 1.56%. On the London Metal Exchange (LME), the ton of metal for three months experienced a decline of 1.23%.
According to Carsten Menke, an analyst at Julius Baer, “China’s data disappointed in all aspects,” and the country’s interest rate cut “won’t be sufficient as China’s struggles run deeper and reflect a mix of cyclical and structural factors” to foster consumption.
Menke assesses that in the future, China’s expectation to demand less copper as the country’s population points to an overall contraction, accompanied by less pronounced urbanization, which will require less from the real estate sector and consequently reduce the demand for copper.
Commerzbank estimates that Chinese copper production has also increased, intensifying the supply while demand continues to remain low. According to Commerzbank, a recent survey by the Chinese state agency Antaike shows that basic metal production grew by 3.4% in July, based on a sample that corresponds to 82% of China’s total production.
