The LME Copper price crashed back below $10,000 as fears of slowing demand from its biggest consumer encourages profit-taking.
Three-month Copper traded on the London Metal Exchange is trading at $9,905 in Asian hours and attempting to pare yesterday’s -3% losses.
Over the last month, the Copper price has retreated from its all-time high of $10,746. Yesterday’s low of $9,763.50 was over 9% below the 5th of May peak.
A confluence of negative factors has arisen recently. Most noticeably, China’s decision to begin monetary tightening has led to a reduction in the countries credit impulse. Furthermore, retail traders have been restricted from speculating in commodity products.
This comes as the world’s biggest consumer of raw materials desperately tries to cool down commodity prices.
Worries that the measures may lead to a declining demand have been reinforced by the drop in the Yangshan Copper import premium. To a 12 year low of $28.50.
Later today, traders will be keenly anticipating the release of the U.S Non-Farm Payrolls.
Yesterday’s ADP jobs number pointed to a sharp increase in hiring over the last month. A trend that is likely to be reflected in today’s data. The fed has already announced the withdrawal of its corporate credit facility and will be forced to consider further tightening measures on increasing labor force participation.
LME Copper Outlook
In my last Copper report on the 14th of May, I suggested a price target of $9,600. However, if today’s job numbers are as strong as the market is expecting, the Copper price may exceed this previous bearish target.
A broader, macro-driven correction could take the price as low as $9,150 and back to the breakout level from March.
A trend in place from February provides some technical support at $9,690; however, it will be no match against the threat of central bank liquidity reduction.
Of course, whilst all the indications point to a better-than-expected data dump today, nothing is guaranteed. Subsequently, If the price regains ground above $10,000, it will likely extend to last week’s high of $10,363.
I maintain that Copper is in the early stages of a long-term super-cycle that could take the price much higher in the years to come.
But for the moment, it is likely to get cheaper first.