Copper fell below $6,000 on Monday, bringing a halt to a rally in May, on continued weak demand in China, the biggest consumer of the metal.
Prices for three-month delivery on the London metal Exchange touched $5,985 on Monday. The metal has fallen more than $400 from its price at the beginning of May.
There are few signs of strong orders for copper in China by cable makers and for power grid investment, despite the arrival of the traditional peak buying season.
“The downstream demand is still fairly limited, we don’t see sufficient or meaningful recovery in terms of fundamentals and sentiment has started to turn,” said Xiao Fu, an analyst at BOC International, a unit of Bank of China.
Analysts expect China’s copper demand to grow by 4 per cent this year, yet that figure is predicated on considerable use in power grid investment, based on announced government spending plans.
Power grid investment fell by 8.65 per cent in April, according to SMM, a China-based metals consultancy. In the first four months, China completed Rmb86.6bn of grid investment, 20 per cent of the planned amount for the year, it said. Last year, only 88.7 per cent of grid investment was completed.
A fall in copper stocks in warehouses tracked by the Shanghai Futures Exchange in April and May, which was taken as a sign of better demand, may also not have gone to end users, according to analysts.
“The evolution of China’s demand conditions remains the crucial issue for sentiment towards the complex in mid-2015, and neither the micro nor macro evidence for May suggests an improvement in this dynamic,” Standard Chartered wrote in a note. (www.chinainout.com)
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