Cost of copper at a six and a half year low

The cost of copper has fallen to a six and a half year low following China’s falling growth in fixed investment. At New York’s trade on Thursday, copper traded at $2.1585 per pound, the lowest price since May 2009.

China is a key driver of copper demand, accounting for 45 per cent of global sales. Statistics from China indicate global copper demand has fallen to 11.8 per cent, resulting in an all-time credit expansion low in other areas in June.

Chinese fixed investment has declined to a 15 year low due to changes in Beijing’s policy which plans to redirect China’s investment led economy into services and consumptions based system.

However, the slowdown in the mining sector could be potentially cushioned by increasing demand in the infrastructure sector. Chinese demand for passenger cars have increased by more than 13 per cent in October, the highest performance in 17 months. China has the largest vehicle market in the world, and forecasts have estimated it could have 30 million units per year by 2020.

Earlier this year, fixed asset investment data in metals and mining revealed damaging growth estimated at 10.2 per cent year on year for the first ten months of 2015. This marks the 17th running month of falling growth, and represents the slowest growth since 2015.

The plummeting property sector which has only experienced two per cent growth in October has also contributed to failing fixed investment. Industrial production growth has also affected fixed investment, equalling a six year low reached in April at 5.6 per cent. Cement production and electricity investment have also experienced industry slowdowns.

From the demand side, a combination of depreciating currencies from producing countries and savings from lower oil prices have resulted in an oversupply.

Head of market analytics at Marex Spectron Guy Wolf told the media marginal costs will continue to influence metal prices.

"Costs of production have been relentlessly driven lower and are not providing a floor to prices. People don’t really know where the floor is,” Wolf said. 

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