Copper metal is continuing to pile up in warehouses and Chinese overstock may be making its way into London Metal Exchange warehouses all over Asia as the price has dipped to historic lows.
According to the Financial Times, “LME copper stocks have surged by almost 40% this month – or 50,000 metric tons – spooking investors already concerned about flagging demand for the metal and plentiful supplies.”
“One theory doing the rounds,” according to the paper, “is that a major metals trader is moving copper that had been sitting in China – the world’s largest consumer of copper – to LME warehouses in Singapore, Malaysia, Taiwan and South Korea where financial incentives are being offered to store metal.”
According to this month’s Copper MMI analysis, Raul de Frutos and Jeff Yoders agree that supply-side issues, such as overproduction, are seminal.
“Investors are simply not excited enough to trigger a bull run in copper prices,” they write. “The Copper MMI fell 5% last month as overcapacity still plagued the red metal. Rather than cut capacity, Rio Tinto Group approved a $5.3 billion expansion to more than double output at the Oyu Tolgoi copper mine in Mongolia, making it one of the world’s largest copper mines.
“Rio is also expanding its iron ore efforts. Even though almost everyone seems to agree that the market is oversupplied, copper producers are still quite optimistic on the long-term picture and are expanding rather than curtailing production,” according to their analysis.
You can find a more in-depth copper price forecast and outlook in our brand new Monthly Metal Buying Outlook report. Check it out to receive short- and long-term buying strategies with specific price thresholds.