Why copper’s getting crushed (again)
China’s the world’s number one commodity buyer. So it’s not overly surprising that the slowdown in its economy has been blamed for the decline in the price of copper, which – dubbed Dr Copper – usually serves as something of a barometer for the health of the global economy, is falling.
Today, it’s down 2.24 per cent at $2.93 per pound, extending the fall seen over the last two weeks and hitting lows not seen since at least 2010.
But it’s not just dwindling investment and retail sales that’s hitting the metal’s price. Chinese businesses have been using copper as collateral for loans and, with the first ever bond default the country’s seen, concerns that a glut’s about to flood the market are rising.
How much of this is being used for finance is something of an unknown, but estimates seem to vary between 40 per cent and 56 per cent.
Goldman Sachs estimates that as much as 1m metric tonnes of copper could pour in if deals fail to come to fruition.
In January, China imported a record 536,000 tonnes in January – over 50 per cent more than it did a year earlier. Numbers fell a bit in February, but it’s still a lot of copper for an economy that’s slowing down.