Copper price falls after Chinese economic growth hits 28-year low
The copper price came under renewed pressure on Monday after headline figures showed a slowdown in the Chinese economy to annual rates of growth not seen in nearly three decades.
In thin holiday trade in the US, copper for delivery in March slumped 1.6% compared to Friday's close to $2.7655 per pound ($5,897 a tonne) on the Comex market in New York wiping out the metal's gains for the year.
Data released on Monday showed Chinese economic growth slowing to 6.4% during the fourth quarter, the lowest in almost a decade and the third quarter in a row of slowing growth. For 2018 as a whole the country's GDP expanded by 6.6%, which was the lowest rate since 1990.
In a note released on Monday, economists from CIBC said while it is not expecting a recession in 2019, it expects "increasing trade barriers and tariffs to slow down global growth over the next 18 months, delaying our previously forecast 2020 recovery to 2021.”
The Canadian bank's analysts adjusted their copper price forecast for 2019 to $2.75 per pound, down 10.6% from the previous prediction. For 2020 the bank expects copper to average $2.85, down more than 12%:
“We acknowledge that a stronger-than-expected fiscal and monetary policy response from China, and/or supply disruptions (i.e., Chuquicamata in copper, Chinese smelting constraints in zinc), may support higher price estimates.
“However, a demand slowdown is likely to trump higher sustainable prices.”
China consumes nearly half the world's copper and the metal is considered a good barometer of economic conditions given its widespread use in power grids, communication networks, manufacturing and construction.
At the start of 2019, copper fell to a near two-year low of $2.54 a pound. Copper is technically in a bear market with the price plunging more than 20% since peaking in June 2018 over fears of the impact of the trade dispute between China and the US.