China Is Running Low on Copper. So Why Are Prices Falling?
Copper prices have dropped to their lowest level since July, despite physical market indicators showing tight supply in China.
Benchmark three-month copper on the London Metal Exchange fell to $13,515 per ton on Thursday, with an early rebound on Friday fading. The metal is now about 9% below September's record of $14,875. The selling has come from financial markets, not from a surplus of physical metal.
Paper Market Selloff
Copper has been trading as a proxy for AI infrastructure, and the latest tech selloff dragged it lower. News that Nvidia CEO Jensen Huang is stepping down added to doubts about data-center spending.
Every time AI takes a hit, copper demand and prices come under pressure too.
Monetary policy is adding pressure as a hotter-than-expected US inflation print revived bets on rate hikes. Fed officials have not ruled out a 50-basis-point hike at the December 8-9 meeting, and the stronger dollar triggered selling by model-driven funds.
Physical Market Tightness
China's market tells a different story. Shanghai Futures Exchange warehouse stocks fell 24% in one week to 33,848 tons, the lowest in almost three years and less than one day of Chinese consumption. The Yangshan premium hit a record $240 per ton on Thursday.
Robert Ivanhoe described the physical market as 'tight as a drum,' pointing to record-low smelter processing fees, Chinese smelter production cuts, and new grid tenders from China's major grid operators. He warned that Chinese inventories could be depleted by year-end.
Technical Damage
The technical damage is real even if the sell-off is happening on paper. Copper lost its rising support trend line in late October, and the line acted as resistance when price retested it on October 30.
On Thursday, copper closed below its 200-day moving average for the first time since this rally began. The breakdown also took out the 0.382 Fibonacci retracement at $6.31 and a horizontal support zone. Price is now near $6.21, about 10.7% below the September high.
The next support is the 0.5 Fibonacci level at $6.11. Below it, the 0.618 retracement at $5.91 lines up with long-term support. The RSI sits near 35 and is falling, so copper isn't oversold yet.
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