Copper prices retreat from two-year high of $10,208 a ton amid cautious Chinese demand

Copper prices retreat from two-year high of $10,208 a ton amid cautious Chinese demand.

Copper prices slipped after initially climbing above $10,200 a ton, as market focus shifted towards demand conditions in China, the world's leading consumer of the metal.

Despite a brief surge that saw copper reach a two-year high of $10,208, prices dropped to $10,100.50 by midday on the London Metal Exchange, reflecting a 0.4% decrease.

Chinese manufacturing shows signs of life

The decline in copper prices comes amidst mixed signals from China. A rebound in Chinese manufacturing activity, evidenced by the official manufacturing purchasing manager index (PMI) reaching 50.4 in April, has fueled optimism about sustained economic growth.

This figure, slightly above the Bloomberg survey forecast, marks the second consecutive month of expansion in factory activity.

Government measures to address housing crisis

Adding to the complexity of the demand outlook, China’s Communist Party announced plans to address the excess housing inventory that has long plagued the country's property market.

This move is seen as part of broader efforts to stabilize the real estate sector, which has significant implications for copper and other industrial metals used extensively in construction.

Impact of rising copper prices on seasonal demand

Despite the positive signs of manufacturing growth, the expected seasonal uptick in copper demand has been delayed.

The rapid increase in copper prices over the past month, which saw the metal gaining 14% in value, appears to have discouraged purchases by fabricators.

These manufacturers are finding it difficult to pass on the increased costs to consumers, leading to a collapse in the premiums paid for both imported and domestic copper cargoes.

Market outlook amid supply concerns

The fluctuating copper prices are also influenced by a historic squeeze in the supply of mined ore, which threatens to push the market into a significant deficit.

Investors remain bullish on copper's long-term demand prospects, driven by global trends towards electrification and renewable energy, which heavily rely on the metal.

However, the immediate impact of price volatility and demand uncertainties in China continues to dominate market sentiment.