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Copper – the market overview for September 2015

15 October 2015
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Copper market continued the negative and unstable trend in September.

 

The red metal is under constant pressure of the market since 2011, when its price reached the peak. Since then, its value is constantly falling. Small increases and short-term stabilizations were short calm periods between the more and more often price correction.

 

The situation in China and concerns about the slowdown of its economy discourages investors from investing in copper, which resulted in a sharp decline in its value this year. The collapse of China's securities market and the devaluation of the yuan have only deepened the already difficult position of copper.
Demand for copper is still low and insufficient to make any positive changes in the oversaturated market. China continues to spend too little, and their surpluses are increasingly burdening the world market. China reduced imports of copper by 10% this year while increasing its own production by 9%.
In September, however, there is one positive shift recorded - on the London Metal Exchange (LME) the amount of recorded stored copper began to decrease. With high amount of 371,250 tons in August, September ended with 323,800 tons of stored copper, or almost 50,000 ton less. The reason for reduction in inventories is not clearly defined. According to certain sources, copper is only removed from expensive LME warehouses and moved to less expensive unrecorded warehouses.

 

Copper

 

Decreased production has also some influence on reducing inventories probably has, regarding the fact that nearly one-fifth of the world's copper producers is currently working with losses. Companies are trying to survive. Some are trying to cut up all operational costs while others cut production. Among others, Glencore PLC announced the closure of two mines in Africa, which will reduce its copper production by twenty percent.

 

Analysts estimate the end of this extremely unfavorable cycle for copper is slowly coming, but they also warn it will have to take a certain time until demand recovers enough or until production is sufficiently reduced, to have a positive impact on the price of copper.

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