Copper price: trading the ‘demand destruction’ in base metals
Outlook on the price of copper as it breaks the $8,000 level on the LME.
Copper has just broken the $8,000 level on the London Metal Exchange (LME) and other base metals are following suit.
As IGTV’s Jeremy Naylor explains this level of demand destruction is seeing a short trade win out, not just for copper but many other base metals, including zinc and aluminium.
(Video Transcript)
Massive demand destruction
There appears to be massive demand destruction in base metals.
This is most notably seen in today's session, with Copper having dropped below the $7,000 a tonne level the LME. The LME is the benchmark price for raw copper.
Copper chart
Let's take a look at the price of the copper chart, because as of this moment we're down 26.5% from the highs we had back on the 7th March and we're now trading at 7981.
Now Bloomberg is quoting Wei Lai, an analyst with TF Futures, saying there are mounting concerns about global demand for the metal. The copper market, he said, will face a surplus of about 10% of the total supply in the coming two years based on a situation of a hard landing for the US and European economies.
It doesn't stop there either because the short trade, and if you do go short on this your stock goes above the highest point of today's candle at around about the 8290 level, if you're short on this because this now seems to be having support down here at 7685 which were the lows that we had on this chart here back in February 2021.
Zinc
But it's not just copper, it's other base metals as well.
Look at the way in which Zinc has fallen below support in today's session, now at 3046. Same sort of way to approach this if you're short on this, next price target is down here the lows that we had back in September 2021 and most base metals are having the same sort of story. You can see today we've dipped below this 2424 support for aluminum.
Aluminum now has a price target of 2304 which are the lows we had back on the 24th May. So it certainly seems like base metals are getting beaten up.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
Speculate on commodities
Trade commodity futures, as well as 27 commodity markets with no fixed expiries.
- Wide range of popular and niche metals, energies and softs
- Spreads from 0.3 pts on Spot Gold, 2 pts on Spot Silver and 2.8 pts on Oil
- View continuous charting, backdated for up to five years
Live prices on most popular markets
- Forex
- Shares
- Indices
