Copper prices are on track to register their biggest weekly loss in 16 months Friday, as news that rail exports of the metal from Africa’s largest copper producer have resumed, tipping prices back into the red.
The London Metal Exchange’s flagship three-month contract was trading at $6,985.75 a metric ton at 1006 GMT, down 1.4% on the day.
After clawing back some ground Thursday following some better-than-expected manufacturing data from the U.S. and a rebound in the gold price, copper turned lower Friday following news that Zambia’s only rail link to the East African coast has resumed operation after an accident shut the line for two weeks.
The reopening is a major relief for mining companies operating in what is Africa’s largest copper producing country. Since early this month they have not been able to export minerals by rail from the landlocked country.
For copper investors, however, the news that further supply of the metal will be finding its way onto the market is being viewed as yet another reason to sell.
“The Zambia news is weighing on copper,” said VTB Capital analyst Andrey Kryuchenkov. “The market was in a bearish mood already. We’re still seeing fund liquidation amid weaker macroeconomic sentiment.”
Copper had been dragged lower this week by gold’s record-setting selloff. Copper selling escalated in Asian hours Thursday, with metal falling below $7,000/ton for the first time in a year and a half as investors shed holdings of copper, gold and oil.
Concerns about weak base metal demand from top consumer China have also dented market sentiment. Recent economic data and forecasts related to China point to less demand for raw materials, including copper, which is used in a variety of industrial goods.
Meanwhile, stockpiles of copper continue to rise, with the amount of the metal held in LME warehouses rising a further 2,000 tons to 614,350 tons Thursday, up 92% on the start of the year.
Copper prices may, however, start to stabilize in the months ahead as lower prices attract fresh interest from physical buyers, Deutsche Bank said.
“We believe the next several months could represent an attractive period for metals consumers, those who wish to take advantage of a coincidence in the timing of weak near-term fundamentals,” the bank said.
The second quarter is traditional a period of seasonally strong demand for physical base metals in regions such as Asia.