Copper, which has been one of the surprise positive performers this year, fell under some pressure this week. On Thursday, the red metal closed down 1.3% at $6,468 per metric ton on the London Metal Exchange after the release of some weaker-than-expected Chinese economic data stoked traders to continue to unwind their bullish predictions.
Copper has been climbing higher this year, with the red metal hitting a three-year peak in early September. Its meteoric rise had stumped investors, as it has not been backed by an equivalent improvement in supply/demand fundamentals. Instead, the rise has been partially attributed to improving sentiment over China’s economy, but the data released on Thursday dented expectations.
Early Thursday, monthly industrial production numbers for August were released, and they showed the slowest increase since December, and fixed-asset investments grew at their smallest rate since December 1999. This caused investors to profit-take, and extend the red metal’s descent for another session.
Copper prices are now down over 7% since they reached a three-year peak in early September. Adding extra impetus to the downside was inventory data, which showed copper holdings in LME tracked warehouses increased by another 16% on Wednesday.
While the recent sell-off has been a result of fundamentals, it resulted in copper’s technicals turning bearish, and that could result in the metal experiencing even more downside in the coming weeks.
Meanwhile, one positive development for the market – China’s non-ferrous metal output – which includes copper, fell to a one-year low in August. The drop is seen as a result of the country’s environmental crackdowns, which should increase later in the year.