Copper Futures Drop on Weak Demand

Copper prices dropped on Wednesday after multi-year highs the commodity reached in value last month. Rising production in leading copper-producing countries such as Chile and Peru pressured its further advances.

September copper futures contract on the Shanghai Futures Exchange decreased by 0.7% to settle at $7,386.68 a tonne. 

According to a note published by ANZ, Australian multinational banking, and financial services company, the commodity struggled after signs started to show that supply disruptions eased. These signs offset relatively positive economic data. 

Last month, amid the coronavirus lockdowns, supply disruptions in Chile, and Peru boosted the metal prices. London and Shanghai copper contracts hit a two year high in July. 

Codelco, the world’s top copper producer from Chile, reported that January-June production increased by 4.7%. Meanwhile, labor strikes, expected to last a month at two Chilean mines, did not happen.

As of Peru, the world’s second-largest copper producer, June output hiked by 40.8% compared to the previous month. It was the result of resumed activities in mines.

Three-month copper on the LME increased 0.3% to settle at $6,470 a tonne. A weaker US dollar made the contract more affordable for buyers holding other currencies. It had earlier dropped as much as 0.3%.

Copper Price Outlook amid US-China Trade Tensions 

The price of copper has been established as a measure of world economic growth. Increases in copper value suggest an increase in global construction and manufacturing.

Besides the notable increase in the Peruvian and Chilean copper production, the metal prices experience influence by the concerns on global growth. The reason behind it is geopolitical tensions between the world’s largest economies, the US and China. On the other hand, the second wave of coronavirus infections starts to appear in multiple locations around the world. The number of confirmed cases rises above 18.5 million.

Last month, US President, Donald Trump stated that he doesn’t feel the same way about the trade deal with China. Phase One Trade Agreement, signed on January 15 between the US and China, turned out to be difficult to comply with after the coronavirus pandemic hit the world. The officials of the two countries agreed to meet on August 15 to discuss the agreement. The risk of a breakdown in relations becomes more expected. Therefore, the copper price rally may continue to delay as investors concentrate on developments between the world’s two biggest economies.