The fear of inflation and the change in monetary policy in the US would also be behind these setbacks.
The Chilean economy had gotten used to the positive news from copper in recent months. The price rises were incessant amid expectations of a global recovery, Chinese demand and low inventories.
The highest point of that rally was recorded on May 10 last when the pound climbed to US $ 4.86 and experts debated whether or not there was a supercycle.
However, from that point on, the price of the red metal entered a kind of stabilization period and then into a downward spiral in which it accumulated a fall of 10.46%.
And that trend is confirmed today as the raw material experienced a powerful 3.51% decline, which is the largest daily drop since March 4. With this result, copper reached US $ 4.3329 on the London Metal Exchange, which in turn represents its lowest level since April 23 (US $ 4.24).
The selloff began in early morning trading, when Chinese traders returned from a long weekend. The decline in copper prices below the 50-day moving average of around $ 9,781 accelerated the selloff.
Changes in China
“The main catalyst for the downgrade is the intention of the State Assets Supervision and Administration Commission of the State Council of China (SASAC) to investigate the overseas derivative positions of China’s SOEs, leading to the closure of exhibitions without coverage ”, explains Juan Carlos Guajardo, executive director of Plusmining.
According to him, the SASAC is “a special agency of the State Council of the People’s Republic of China that has the responsibility of supervising, on behalf of the State, the companies in which the Government of China has equity participation.”
This is in line with the determination of the National Development and Reform Commission (NDRC), which last week renewed its commitment to intensify the monitoring of commodity prices and strengthen the supervision of the spot and futures markets.
All of the above “deepened last week’s reports, according to which the China Strategic Reserve Office reported that it intended to sell a part of its aluminum, copper and zinc stocks,” Guajardo assures.
His view is shared by Williams Adams, director of base metals and battery research at Fastmarkets, who told WSJ that “the biggest headwind is that China talks about curbing inflation and ending metal hoarding and speculation.” , adding that “that, obviously, will be a significant factor in eliminating some of the hot money that has entered the copper market.”
In this context, the red metal was not the only one that suffered a bad day. Nickel fell 4.4% to US $ 17,655 a ton, while aluminum fell 1.2% to US $ 2,460 a ton and zinc fell 1.2% to US $ 2,459 a ton.
However, it should be noted that the average price of the red metal in the year is above the barrier of US $ 4 per pound, an unprecedented figure, a framework in which there are still those who allow themselves to be optimistic about its prospects.
“The next stage of the rally will be led by the physical market around the third quarter, when the entire supply chain has depleted its stocks,” said Citi’s Commodities Strategist Oliver Nugent.
In the framework of the Monetary Policy Report (IPoM), the Central Bank revised up its calculation for Chile’s GDP growth this year. The entity led by Mario Marcel corrected this and many other economic variables, including a very relevant one for the country: the price of copper.
If in March the projection for the average price of the year reached US $ 3.95 per pound, in the June Report that calculation rose to US $ 4.25. It is an unprecedented value for the main product of the country.