Talking Points:
- China accounts for 40% of copper demand
- Chinese Manufacturing PMI, GDP Growth Rates, and Housing Prices experience multi-month declines
- Demand for copper has dropped leaving prices looking for support at 2.90
Copper is the third largest industrial metal after iron ore and aluminum. It is both malleable and ductile with a high resistance to corrosion. Its ability to serve as a thermal and electrical conductor makes it a popular metal to use in wiring and telecommunications. As such building construction is the largest single market at 30% followed by electronics and transportation. Within these markets China accounts for the largest share of demand at 40%. Thus copper prices remain sensitive to changes in the Chinese housing and manufacturing industries.
After steadily rising from February to July, China’s manufacturing PMI has since retraced from a high of 51.7 to 50.8. Within the PMI index major declines occurred between July and October within the following categories: new export orders, purchasing volume, and raw materials purchase price. Declines in the overall PMI are reflected in China’s lower Q3 GDP growth rate (-0.2%). Also contributing to the slowdown in economic growth, was a slump in the real estate market.
Year to date new construction in the Chinese market is down 11% with newly built housing prices declining for a third straight month, registering -1.3% in September. Pre-existing property prices are also down with 67, out of 70 major Chinese cities experiencing a price drop in August. Over the last four months, with subdued growth in the manufacturing and construction industries, demand for copper and other industrial metals has lessened. As a result copper has continued its decline in a descending price channel with support at 2.90.
Daily Copper Chart
Chart Created by Walker England Using MarketScope 2.0
