Has copper bottomed out? 

High Grade Copper has fallen for the fourth day in a row and the negative trend looks set to continue. HGK4 has dipped below USD 2.9155/lb; the lowest level since July 2010. On the London Metals Exchange the price has been below USD 6,500.00 per tonne.    

The reason behind the significant drops is largely because stockpiles have been used to finance Chinese shadow banking loans. The market fears these deals could unravel because the Yuan has devalued, and a state run firm was allowed to default on bonds last week. Since the bond default the copper price has plunged around nine percent. Meanwhile, iron ore, another raw material used to finance shadow banking loans fell almost ten percent.  

Trade data for February then showed a reduction in imports of both copper and iron ore.  

As industrial consumption of copper in China falls, along with GDP, the danger is that the stockpiled copper could be unleashed on an already oversupplied market.      

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