LONDON (Reuters) – Doctor Copper seems very confused at the moment. The metal with the honorary degree in economics is caught between the current reality of deteriorating macro signals and the belief that things will soon get better.
Nowhere more so than in China, the single biggest user of copper and just about every other industrial metal. It was Beijing’s campaign to soak up excess liquidity in the Chinese economy that stopped copper in its upward tracks in the second quarter of last year.
The London price slumped from over $7,000 per tonne to under $6,000 over the course of June and July. Fears of a slowdown in China, even an engineered one, sent funds running for the copper exit door.
Since then copper has trudged sideways in a broad $5,700-6,400 range, marching to the news beat of the U.S.-China trade dispute. More tariffs mean more potential pain for Chinese manufacturers. Fewer tariffs help Beijing to re-stimulate the country’s flagging growth engines.
Stimulus is already on its way. Doctor Copper’s problem is calculating when it’s going to start working and whether it’s going to be sufficient to kick-start the Chinese economy.