The real reason the copper price is being crushed – by Frik Els ( – August 19, 2015)

The turmoil on Chinese share and currency markets, and worries about the true extent of the country’s economic slowdown continue to rattle investors.
Given its widespread use in manufacturing and construction coupled with the fact that China consumes 45% of the world’s supply, copper has been bearing the brunt of this bearishness.

On Wednesday in New York trade December copper contracts were trending weaker again after breaching the key $5,000 level yesterday for the first time since the global financial crisis.

Bloomberg Intelligence analyst Kenneth Hoffman spoke to after returning from a tour of China to find out the true state of copper demand in the country.

Hoffman has been visiting China for the past twenty years and in 2015 saw a sea-change in sentiment inside the world’s second largest economy:

“A few years back the analysts and companies in London started to get more and more concerned. Then it sort of spread to Canada and slowly moved to Singapore and Hong Kong.

“China up until late last year was pretty optimistic.

I asked many analysts and traders in China how long can the downturn last? And it ranged from three years to ten years
“When I went in April there was a decided change in the mood. On this last trip I was really surprised how negative sentiment has become. I was often asked: “What is a bullish thing you could say?” Everyone was just so bearish and concerned about what was going to happen.”

Beijing, under Xi Jinping particularly, is determined to move away from an economy based on infrastructure investment and heavy industry to one led by consumption and services: “This strategy has been firmly in place for five years – and you’ve seen copper go from $10,000 to $5,000 over this time.”

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