LME copper has fallen to its lowest level in four weeks, losing more than 7 percent from the three-year high it touched last week.
Copper continued to fall alongside other base metals on Thursday (September 14) after weak Chinese data signaled slower demand from the top consumer.
LME copper fell 1.1 percent, to $6,482 per tonne, after touching its lowest level since August earlier in the day.
Copper prices hit a three-year high of $6,970 last week following a rally that had many investors wondering whether prices could hit $7,000.
Many analysts warned that the increase could be “overhyped” and not based on fundamentals. Since then, copper has trended down, dropping more than 7 percent from its highest point this month.
“A downturn in Chinese infrastructure investment would be particularly negative for metals,” said Caroline Bain of Capital Economics. “That, plus profit-taking is behind copper’s fall today.”
On Thursday, disappointing Chinese industrial data negatively impacted the metal as it pointed to slower-than-expected demand from the Asian country.
“Chinese headline macro data for August was surprisingly weak with headline figures missing survey estimates and falling month-on-month,” said analysts at Liberum Securities.
“We had expected momentum to carry the economy for at least a month longer, given the strong PMIs and recent price action in commodities (implying at least speculation of growing demand),” they added.
Other factors, such as a stronger dollar and surging LME warehouse inventories, have also put the red metal under pressure. On-warrant LME inventories not earmarked for delivery rose 26,000 tonnes to reach 186,125 tonnes — up 67 percent from a September low touched last week.
“Given the lofty price levels and extended investor position exhibited by many of the base and ferrous metals, this data should catalyse a continuation of the short-term technical correction that began in several markets last week,” said Marcus Garvey, an analyst at ICBC Standard Bank.
“In light of today’s data, we doubt that either discretionary investors or physical buyers will be quick to jump into a market that still holds the potential for significant liquidation,” he also noted.
Similarly, market watchers polled by FocusEconomics expect copper prices to fall between now and the end of the year. Looking ahead to the next few months, they estimate that the average copper price for Q4 2017 will be $5,870.
The most bullish forecast for the quarter comes from ABN AMRO (AMS:ABN), which is calling for a price of $6,674; meanwhile, Euromonitor International is the most bearish with a forecast of $4,899.
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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.