Copper prices fell almost 4% on Wednesday after China said it will strengthen its management of commodity supply and demand to curb any 鈥渦nreasonable鈥� increases in prices.
Prices for聽commodities聽such as coal, steel, iron ore and copper 鈥� of which China is the world鈥檚 biggest user 鈥� have surged this year, fuelled by post-lockdown recoveries in demand and easing liquidity globally.
Copper for delivery in July was down 3.87% midday Wednesday, with futures trading at $4.5425 per pound ($9,993 a tonne) on the Comex market in New York, heading for the biggest one day decline this year.
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China will step up adjustments on the trade and stockpiling of聽commodities聽and reinforce inspections on both the spot and futures markets, state broadcaster CCTV reported the cabinet meeting chaired by Premier Li Keqiang as deciding.
It will crack down on malicious trading and investigate behaviour that bids up prices, according to the report.
Shortage expected
Investors have been piling into copper as global stimulus spurs demand and longer-term projections show supply won鈥檛 match the surge in consumption from the green-energy transition.
With few new mines being developed, both Trafigura Group, the world鈥檚 top copper trader, and Goldman Sachs say prices could hit $15,000 a tonne in the coming years.
鈥淲e think we could go as high as $20,000 a tonne if the supply of scrap copper doesn鈥檛 make it to the market,鈥� Francisco Blanch, head of global commodities and derivatives research at Bank of America, told Bloomberg. (Watch the full interview below)
鈥淭he supply of ores is declining across Chile and we have elections coming up in Peru, where there are potential fears of sector nationalization.鈥�
Chile鈥檚 Cochilco copper commission said on Wednesday that it was significantly raising its projection for the price of copper this year to $4.30 per pound.
In January, Cochilco had forecast a price of $3.30 for 2021, but said it was updating its projection because of expectations of a short-term deficit through 2022 of refined copper and a drop in inventories in warehouses tracked by the London Metal Exchange.
Cochilco said that increased speculation in the market was playing a role in bolstering copper, adding: 鈥淭his could push the price to new highs in the short term.鈥�
The commission also predicted that copper production out of Chile would hit close to 5.8 million tonnes this year, a year-on-year increase of 1.8%, but below its previous forecast of just under 6 million tonnes.
(With files from Reuters and Bloomberg)