Expect further slides in the price of copper

Copper prices have slid by around 10% this year, and are expected to fall further.

Copper prices have slid by around 10% this year to $6,700 a tonne. Since 2011, as Longview Economics points out, a structural bear market has been underway, with prices down 32%, and the outlook remains negative.

Chinese demand growth edged down last year and this trend should endure. Half of China's copper demand stems from the construction and infrastructure sectors, and a slowdown in real-estate construction is underway.

Inventories of unsold properties are at a 12-year high and prices and transaction volumes are heading south, foreshadowing fewer housing starts and hence lower copper demand.

The government is clamping down on credit-fuelled investment spending in a bid to promote consumption. At the same time, mined supply is expanding. Last year it rose by 8%, its fastest pace since 1996, and it is expected to grow by 5% this year.

The size of the market surplus over the next two years will take investors by surprise, says Longview.

A clampdown by Chinese authorities on the use of copper as collateral for loans looks set to release more onto the market, pressuring prices further. By the end of the third quarter, reckons Capital Economics, copper will be trading at about $6,000.

Recommended

Barry Norris: we’re already in the 1970s. Here’s how to invest
Investment strategy

Barry Norris: we’re already in the 1970s. Here’s how to invest

Merryn talks to Barry Norris of Argonaut capital about the parallels between now and the 1970s; the transition to “green” energy; and the one sector w…
19 May 2022
Is the oil market heading for a supply glut?
Oil

Is the oil market heading for a supply glut?

Many people assume that the high oil price is here to stay – and could well go higher. But we’ve been here before, says Max King. History suggests tha…
16 May 2022
Why investors should consider adding Glencore to their portfolios
Share tips

Why investors should consider adding Glencore to their portfolios

Commodities giant Glencore is well placed to capitalise on rising commodity prices and supply chain disruption, says Rupert Hargreaves. Here’s why you…
13 May 2022
How to invest in the multi-decade boom in industrial metals
Industrial metals

How to invest in the multi-decade boom in industrial metals

The price of key industrial metals has already begun to rise. The renewable energy transition will take them higher, says David Stevenson. Here's how …
6 May 2022

Most Popular

The ten highest dividend yields in the FTSE 100
Income investing

The ten highest dividend yields in the FTSE 100

Rupert Hargreaves looks at the FTSE 100’s top yielding stocks for income investors to consider.
18 May 2022
Aviva: a share for income investors to tuck away
Share tips

Aviva: a share for income investors to tuck away

Insurance giant Aviva is one of the highest yielding stocks in the FTSE 100 – and it’s cheap, too, making it a tempting target for income investors. R…
18 May 2022
Despite the crypto crash, bitcoin still has a bright future
Bitcoin & crypto

Despite the crypto crash, bitcoin still has a bright future

Cryptocurrencies have crashed hard, with bitcoin down by more than 50% from its peak. But, says Dominic Frisby, bitcoin still has a future – it is the…
19 May 2022