The copper price collapsed yesterday afternoon and shed $200 per ton within a matter of minutes. The price slide continues this morning and copper falls below $6,400 per ton – its lowest level since July 2010. Doubtless the data to come out of China at the beginning of the week, which appear weak at first glance, are to blame for the price slump, along with fears of credit risks in the country after a recent payment default on a corporate bond – the first incident of its kind in China.
A number of stop-loss levels were triggered when the price dipped below the $6,600 per ton threshold; this resulted in technical follow-up selling and thus exacerbated the price slide. The fact that the price simultaneously fell below the $3 per pound mark on the COMEX in New York is also likely to have contributed to the wave of selling on the LME in London. In technical terms the copper price looks embattled, and from this viewpoint alone copper could continue to slide down as far as $6,037.5 per ton, the low it recorded in 2010.
In our opinion, however, the slump is already excessive, and there is no fundamental justification for its low level. What is more, the price does not reflect the current supply-demand situation on the global copper market – it is very tight, as the International Copper Study Group will doubtless confirm in the next few weeks. Furthermore, the currently low prices make it unattractive to commission new mining projects, which will tighten supply in the medium term. We are therefore confident that the copper price will recover significantly during the course of the year.