Concerns over demand from China has pushed much of the metals sector in to its low. Rising supply of late-cycle commodities such as copper and aluminum paired with uncertain Chinese demand may restrict metal prices through next year.
Copper has fallen 16% this year as China’s economic decline meaning there is less demand for pipes, wiring and building materials. Overcapacity in China’s steel industry will ease this year due to fewer new plants and elimination of the many facilities failing to meet environmental standards. In fact, this August copper hit a six-year low of $2.20 a pound, which is down from an all-time high of about $4.66 in 2011.
Another problem arise from China’s recent devaluation of the yuan, which will slow the country’s imports of industrial metals. Like other commodities copper is traded in dollars, so with the yuan the metal will be more expensive for Chinese buyers.
Metal prices may stay near depressed levels in 2016 as new supplies keep coming to market despite the lack of recovery in demand. Metal prices are likely to remain low until overcapacity is cut and demand picks up. Metal prices have plunged this year largely in part due to the world’s largest consumer China’s increasing supply and slower demand growth.
Stay tuned for more updates.