Copper prices have come off their 2017 highs. Copper, which closed almost flat last month, has lost 3.3% in December. In this part, we’ll see why copper prices have shown weakness recently.
In the past few months, there have been concerns about Chinese copper demand (FCX) (GLEN-L). China’s copper demand indicators, including fixed asset investment and real estate investment, have shown signs of moderation after a strong 1H17. China’s copper import data disappointed markets last month. However, copper bulls largely ignored the red flags about Chinese copper demand. Copper bulls pointed to the looming supply-side led deficit as copper’s bullish driver.
We saw copper markets get a little excited about the expected rise in the demand for electric vehicles. Although we could see growth in electric vehicle sales, it would come from a much lower base. Also, the growth could be gradual. We won’t exactly see an immediate rise in copper demand because of vehicle electrification.
Some of the factors that fueled copper’s 2017 rally where lower fundamentals than initially perceived by the markets. For instance, we saw a sharp rise in copper prices after China announced that it would ban certain grades of copper imports (ANTO) (FM). As we noted in Freeport and Copper: is a Correction in the Cards?, copper scrap could still be processed somewhere else. The scrap isn’t going out of the supply chain.
Next, we’ll see what’s fueling the recent sell-off in copper prices (BHP).