Reuters reports copper hit a one-month low on Wednesday, pressured by worries about the outlook for demand after factory growth in top consumer China slowed in November, a poor bond sale in Germany intensified concerns about the euro zone debt crisis and US efforts to tackle its budget flounders.
Three-month contracts for the red metal fell to a one-month low at $7,168 a tonne in intra-day trade in London and extended its losses in New York where it was trading at $3.27 a pound by early afternoon, its lowest level since October 25 and down 30% from its 2011 high of $4.61 set in February.
Copper used in the power, telecoms and construction sectors is often seen as a barometer for economic growth, but a new research report suggests “Dr. Copper is Dead” and that the red metal, along with oil, have actually been lagging other economic indicators.
In short: things may well be even worse than the fall in the copper price suggests. BusinessInsider quotes the research note from investment bank SocGen:
“Doctor Copper is dead because copper prices will, in our view, not be leading the ongoing slowdown of the global economy. Investors who use the copper price as a leading indicator for the current business cycle downturn are likely to be disappointed as copper is likely to lag other leading indicators. The reason for this is simple: the physical copper market is tight and has tightened further over recent months. The same is true for oil. The physical crude oil market is extremely tight at present, which explains why crude oil prices have been very resilient despite the terrible newsflow coming out of Europe and fears of a global recession.”
8 Comments
SingaporeXpat
The news of its death has been vastly exaggerated.
Realist
Common sense and a level headed approach is what is needed. NOT sensational reporting leading to instant gratification and wild swings in sentiment.
Bill Rich
I think that the rumors of the decline of copper are simply fueled by countries (like China) who want to get this resource dirt cheap. The LAST thing that we need is a big sell off of copper inventories. This will only hurt us.
Nowoods
It is more about speculation than true “death of copper”… the world and especially China is still in need!
Eric Schomburgk
The world “use” to have periods of crisis, this is one….but that not means some activity or a metal with high demand for the future in automotive industry (hybrids), electronics, power generation, etc. Be optimistic……
Future investor
If anything this is a great time to buy if you don’t mind holding for awhile. I hope every article is not as vague as this one with such a pronoun name attached to it.
truth be told
To Funny ! Every day there is another crisis yet everybody in the developing nations needs/wants indoor plumbing, cars to drive, hydro for there home. You would think all these analysts wuld get tired of feeding this tripe to the masses all the while that they are speculating. Shameful !!!
Jtschwab6
Bill Rich is absolutely correct. China will take advantage of any spin to buy cheap and stockpile for their future conquest plans. it is no coincidence that they have built their first aircraft carrier.