Copper is trading lower once again today, as the bear market continues to grip the base metal driving it down to prices not seen since 2009. As the chart below shows, prices rose sharply from 2009-2010 but have been trending lower since.The price of Copper is highly sensitive to the global economy and weaker demand for it is sometimes seen as a symptom of underlying weakness in the world’s biggest economies, particularly China.
China is facing an unprecedented decline in refined copper imports as a slowing economy erodes demand in the world’s biggest consumer. Shipments will shrink 10 percent in 2016 as consumption weakens, domestic supplies increase and less metal is used for collateral in financing, according to Stephen Huang chief executive officer of trading house Arc Resources Co.
"We’ll see a substantial change in sourcing structure next year as users buy more from domestic producers and less from foreign suppliers," said Huang. The world’s second-largest economy is facing the slowest annual expansion in a quarter of a century as President Xi Jinping steers the country to a growth model based on consumer demand and services rather than state investment spending. As the Chinese economy has softened of late, Copper usage has plunged 24 percent to its lowest level in 6 years.
The past five years have shown a strong increase in demand for Copper as global economies have recovered from the past financial crisis. However this increase is demand has been more than offset by a corresponding increase in supply. The concern for Bulls has heightened of late as even more focus has been placed on weakening demand as a Chinese hard-landing seems increasingly plausible. There appears to be a divergence occurring between the consumption and production of the precious metal which may suggest there’s still more downside to go before we see some support.