December 8, 2016

MANTHANTIPS:- Copper is flashing a warning sign for China’s economy

Recent movements in copper inventories highlight the lack of significant demand for the metal, particularly in the ever important Chinese market,” analysts at BMI Research wrote in a recent note. The country’s demand matters because copper is used to make items as varied as electrical cables and coins, and China is the world’s largest importer. “While the corresponding decline in Shanghai inventories largely offset the jump in [London Metal Exchange], the shift suggests that China’s strong H116 economic data does not in fact reflect improving demand growth,” according to BMI Research. “We expect China’s refined copper imports to decelerate over the remainder of the year, and will remain wary of any other rapid movements in inventories.” BMI noted that in June, London Metal Exchange copper inventories jumped by 70,000 metric tons in a few days. That pushed futures prices out to three months above the cash price for copper — a situation referred to as contango, which reflects an expectation that futures prices would gradually fall to match the expected spot price. On Monday, benchmark copper on the London Metal Exchange traded near a four-week low amid concerns about faltering Chinese demand. But the level of inventories is not the only factor that influences prices, and data on them does not come easily.

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