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Copper and base metal prices fell at the start of the week, amid growing concerns about the demand outlook in China, the world’s largest consumer of industrial metals, after data showed a slowdown in the growth of industrial companies’ profits, coinciding with the approach of a long public holiday in the country.
Slowing profits for industrial companies are putting downward pressure on prices.
Data from China’s National Bureau of Statistics showed that profits at industrial firms rose 4.2% year-on-year in August , compared to 11% growth in July, marking the slowest pace of growth since data showed a decline last November. These figures reinforce concerns about a slowdown in Chinese industrial activity, particularly given continued weakness in consumption and investment, declining business confidence, and the government’s ongoing fiscal consolidation measures.
These developments come ahead of China’s National Day holiday, which runs from October 1 to 7, adding a layer of caution to market activity during the current period.
Copper declines despite continued year-to-date gains
Benchmark copper futures on the London Metal Exchange fell by as much as 1.3%, after the metal ended last week with gains for the second week in a row.
By 11:01 a.m. in Singapore, copper had fallen by about 1% to $14,478 a tonne , while zinc was down 0.9% and aluminum 0.7%.
Despite the recent decline, copper remains close to its record levels, supported by signs of tight supply in the Chinese market, along with a surge in the metal this year.
US tariffs reshape the copper market
Expectations that the Trump administration would impose tariffs on refined copper have fueled a surge in US imports recently, tightening supply in other markets and supporting prices. However, this trade-related support does not negate the impact of underlying economic factors. Traders are closely monitoring indicators of industrial demand and investment in China, as well as the market’s capacity to absorb available supply. Consequently, copper prices are now influenced by a mix of conflicting factors: concerns about supply shortages on one hand, and the potential for weak industrial demand on the other.
The Federal Reserve adds a new pressure factor
In the United States, investors widely expect the Federal Reserve to raise interest rates in October. Higher interest rates typically tighten financial conditions and increase borrowing costs, which can put downward pressure on economic activity and demand for industrial commodities, including copper. This presents the metals market with an additional challenge, as concerns about slowing Chinese demand could coincide with a tighter US monetary policy at a time when prices are still supported by supply and trade factors.
Markets are awaiting signals of Chinese demand.
The decline in copper prices reflects the sensitivity of the metals market to any new signals regarding the Chinese economy, especially since Chinese consumption and investment are key drivers of global demand. In the coming period, investors will focus on developments in Chinese industrial activity, government spending and investment trends, as well as Federal Reserve decisions and developments related to US tariffs.
Copper is facing pressure from slowing Chinese economic indicators and expectations of a US interest rate hike, while tight supply and trade tensions remain supportive of prices. The metal’s direction will depend on how well actual demand can withstand these pressures.
