Copper prices faced continued decline on Thursday, under pressure from concerns that the recent surge to two-year highs may have been driven by speculation, while actual physical demand in China remains subdued.
On the London Metal Exchange (LME), three-month copper shed 0.9% to $9,804 a metric ton by 1020 GMT, stepping back from the recent peak of $10,208 reached on Tuesday.
“You may ask the question whether we have jumped out of the starting block too soon,” commented Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.
“I’m stepping back into the neutral camp. I like the long-term view, but based on actual, on-the-ground demand, we could be at risk of consolidation or perhaps even a correction.”
Hansen pointed out weak signals from China, such as the decline in the Yangshan copper premium, which indicates demand for copper imported into China. Last week, this premium dropped to zero from $42.50 a ton at the beginning of April and was last quoted at $5.
The recent data showed a slowdown in growth in China’s manufacturing and services sectors in April, indicating a loss of momentum for the world’s second-biggest economy.
China’s copper producers are reportedly planning to export up to 100,000 tons of the metal, the largest volume in 12 years, to alleviate the impact of the recent price rally on order books.
Hansen warned that a price pull-back could trigger a sell-off by funds. “The big question is whether we retrace to levels where some of the recent, quite aggressive, fund buyers start to get nervous,” he said.
LME aluminum fell 1.4% to $2,542 a ton, while LME zinc lost 0.5% to $2,866 a ton. Lead remained largely unchanged at $2,179.50, nickel shed 1.7% to $18,565, and tin was down 0.4% at $30,480.
