China copper smelters bracing for shortage of vital scrap metal
Around 30% of China’s refined copper production used scrap metal as a feedstock in 2023.
Copper prices dropped for the second straight day on Thursday, hitting the lowest level in almost 18 months, as the industrial metal heads toward a bear market driven mostly by China’s weaker growth impacting on base metals demand.
Today’s selloff began in Asia, where investors pared back their holdings in copper, gold and oil. Recent economic data and forecasts related to China predict a weaker demand for raw materials, including copper, widely used in construction and manufacturing.
Copper for delivery in three months dived as much as 4% to $6,800 a metric ton in London, the lowest since Oct. 20, 2011. A close at the current level would be 20% below the February 2012 peak, which for many investors is a key indicator that copper is headed towards a bear market.
The market condition, characterized by widespread pessimism among investors, implies a downturn of 20% or more in multiple broad indexes, such as the Dow Jones Industrial Average (DJIA) or Standard & Poor’s 500 Index (S&P 500), over at least a two-month period.
Copper prices have been under pressure this year, shedding about 13% so far, and the International Monetary Fund’s move on Tuesday to lower its global growth forecasts, only made it worse.
Courtesy of Kitco.com
Experts, however, say the heavy short selling may dry up and spur a strong rebound.
“I don’t think we’ll stay below $7,000 for too long… The data shows that the market has never been this short. That for me is a big upside risk for prices because when people start closing out those shorts, you could get quite a big snap higher,” Barclays’ analyst Gayle Berry told Business Recorder.
Aluminum, nickel, zinc, tin and lead also retreated today.
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