December copper fell by nearly 3% on Tuesday to $4.44 per pound ($9,790 per tonne) level in early morning Chicago trading.
At the end of September copper comfortably scaled the $10,000 a tonne level after Beijing announced a raft of mostly monetary measures to stimulate the country’s slowing economy and in particular its besieged property sector.
The rather hopefully named Beijing “bazooka” was expected to be followed up by another stimulus blitz on Tuesday, this time from China’s National Development and Reform Commission focused more on fiscal policy, infrastructure investment and the energy transition.
Traders sold off copper after Tuesday’s briefing turned into a damp squib with losses for the copper price after the run up now going beyond 7%.
Moreover, hopes of market conditions forming similar to that of May when copper hit a record high of $5.20 a pound, or nearly $11,500 a tonne, are now looking less likely.
Benchmark Mineral Intelligence points out that the persistent contango on the LME throughout the recent rally added to the sense of caution over copper prices running ahead of fundamentals, with some drawing parallels with the fund-fuelled price rally in the second quarter:
“Indeed, last week’s Commitment of Traders report from the COMEX indicated a strong return of funds into the copper space, with non-commercial net positions increasing to the highest level since July, supported by a strong build in long positions for three consecutive weeks.
“As a result, the arbitrage between the LME and the COMEX once again blew up, reminiscent of the situation in Q2. However, any extreme run-up should be somewhat buffered by the higher level of stocks on the COMEX, which stood at 71kt as of last Friday, compared to just 20kt at the peak of the arbitrage blow-out in May.”
