Copper prices dropped Wednesday after a jump in inventories increased worries about a slowdown in China’s economy.
Copper prices dropped Wednesday the most in 19 months after a jump in inventories increased worries about an economic slowdown in China, the world’s largest consumer of the metal.
Copper futures for July delivery settled 3.49 percent lower at $2.5435 a pound, below their 50-day moving average for the first time since April 6 and their worst drop since September 2015. Prices of the metal continued falling in extended trade to near $2.53 a pound.
« I think the biggest thing is the worries about China, » said Ryan McKay, associate commodities strategist at TD Securities.
« First we had a large build in LME copper stocks today, adding concern to the already elevated inventory levels, » McKay said. « Also manufacturing data from China this week has come in below expectations, raising concerns around Chinese demand. »
Copper performance so far this week
Source: FactSet
On-warrant inventories available for delivery at LME-registered warehouses increased by 38,950 tonnes, or 32 percent, to 160,200 tonnes, the highest since mid-April, according to Reuters.
Late Monday Eastern Time, the Caixin/Markit manufacturing PMI, a key survey for the Chinese economy, for April showed a greater-than-expected decline to 50.3, the lowest since September 2016.
Copper is a key material used in home construction, industrial manufacturing and consumer goods around the world. The Chinese government injected large amounts of loans last year in an attempt to prevent a sharp slowdown in the world’s second largest economy. While recent economic reports have improved, the stimulus has also slowed.
For copper, « demand conditions are still good, just not as good they were three to six months ago, » said Dane Davis, commodities research analyst at Barclays. « The stimulus is wearing off and it’s starting to feed through in real prices, particularly copper and iron ore. »
Iron ore futures fell more than 6.5 percent Wednesday.
Earlier in the week, copper prices leaped to their highest in nearly a month. Traders expected prices to rise given a planned month-long strike at Freeport-McMoran ‘s Grasberg mine in Indonesia.
— CNBC’s Gina Francolla and Reuters contributed to this report.
