Copper producers in China are taking drastic measures to arrest the plummeting price.
On Saturday it was announced that nine large copper smelters will cut production by over 200,000 tonnes in 2016, which is around 5 percent of 2015 levels.
The move comes as copper prices on the London Metal exchange and in Shanghai fell to six-year lows, on the back of low growth and an oversupplied market. Growth in China, both the world’s largest consumer of the red metal and the top producer of refined copper, slipped to 6.9 percent, the weakest since the financial crisis.
Meanwhile Reuters quoted sources on Friday saying that Beijing was considering buying over a million tonnes of aluminum from local smelters. That would be a positive signal to the market that China is listening to base metals producers and refiners that have pleaded with Beijing to intervene in markets and stockpile metals. A similar program in 2008–09 at the height of the financial crisis did shore up prices, but some analysts are skeptical about its prospects today.
The China Nonferrous Metals Industry Association has also asked for a probe into short selling of metals on the Shanghai Futures Exchange, blamed for double-digit price decline in percentage terms in November according to Bloomberg.
Copper has now traded at 20% or more below its prevailing five-year average for 10 months. According to Barclays during its previous downturn the red metal spent 15 months in a bear market.