Copper price declines on economic woes, ignores demand-supply matrix

• Copper price retreats from two-month high amid recession fears, firmer US dollar.
• ICSG data hints at copper market deficit, increase in bonded stocks’ deficit in China.
• US Durable Goods Orders could entertain traders ahead of Friday’s Jackson Hole speech from Fed’s Powell.

Copper price takes a U-turn after refreshing the monthly high the previous day as recession fears supersede the demand-supply statistics during Wednesday’s Asian session. That said, the red metal also bears the burden of the market’s hopes of the Fed’s aggression, as well as of the doubts surrounding China’s economic recovery.

Copper futures on COMEX drop half a percent to $3.66 by the press time, after rising to the two-month high of $3.73 the previous day. That said, the prices of the most active three-month copper contract on the London Metal Exchange (LME) dropped 0.65% to $8,027.

On late Tuesday, the International Copper Study Group (ICSG) released monthly statistics on the market supply and demand as it said, “The global refined copper market showed a 66,000 tonnes deficit in June, compared with a 30,000 tonnes deficit in May.” The news also mentioned that the first 6 months of the year, the market was in a 72,000 tonnes deficit compared with a 130,000 tonnes deficit in the same period a year earlier, the ICSG said.

It should be noted that the bonded stocks of copper in China showed a 66,000 tonnes deficit in June compared with a 34,000 tonnes deficit in May whereas the global refined copper output in June was 2.17 million tonnes, versus the consumption of 2.23 million tonnes.

Although market data favors copper buyers, fears of economic slowdown, especially concerning the world’s largest industrial player China, exert downside pressure on the metal prices. Bloomberg recently came out with an analysis portraying the Chinese yuan’s fall as another worry for the dragon nation. “The Chinese yuan’s slump to its weakest against the dollar in almost two years adds to what is already a precarious balancing act for Beijing, which is seeking ways to prop up its struggling economy without stoking financial instability,” said the piece.

On a different page, Minneapolis Fed President Neel Kashkari mentioned that the biggest fear is that we are misreading underlying inflation dynamics, per Reuters. The policymaker also added that the Fed can relax on rate hikes when compelling evidence of CPI heading toward 2% is seen. Comments from Fed’s Kashkari tamed concerns that Fed Chair Powell would go slow on rate hikes while speaking at the Jackson Hole on Friday, as backed by Goldman Sachs.

Previously, the August month’s downbeat preliminary activity data for the key global economies renewed recession fears and probed the copper buyers.

Moving on, copper traders will pay attention to Friday’s speech by Fed Chairman Jerome Powell at the Kansas City Fed’s symposium in Jackson Hole, as well as chatters surrounding China, for fresh impulse.