Copper slips on demand fears, supply risks remain

Copper prices slipped this week as weak factory data from China and a stronger dollar weighed on the red metal. Three-month copper on the London Metal Exchange fell 1.8% to $9,420 a tonne by Thursday's close, its lowest in three weeks.

The move came after China's official manufacturing PMI fell to 49.4 in July, below the 50-mark that separates growth from contraction and missing the 49.8 consensus. The reading reinforced concerns about demand from the world's top copper consumer, where the property sector remains in a prolonged slump.

A stronger dollar added pressure. The Bloomberg Dollar Spot Index rose 0.6% over the same period, making dollar-priced metals more expensive for holders of other currencies.

Supply-side risks, however, have not gone away. Workers at BHP's Escondida mine in Chile, the world's largest copper operation, voted to strike after rejecting a contract offer. A walkout would remove roughly 5% of global mined supply. Union leaders said they would give the required five days' notice before walking off the job.

Any disruption at Escondida would hit concentrates, the raw material for smelters. China's smelters, already grappling with tight concentrate supply after cuts at other mines this year, would feel the pinch most acutely.

Global refined copper output is expected to grow only 1.5% this year, the slowest pace since 2020, according to the International Copper Study Group. Cuts at Codelco and Anglo American's Los Bronces mine have already tightened concentrate supply.

Inventories tell a mixed story. LME-registered copper warehouse stocks stood at 245,000 tonnes on Thursday, up from 135,000 tonnes in late May. But most of that metal is earmarked for delivery against existing contracts, traders said. Available stocks, excluding those already booked, are closer to 120,000 tonnes.

The physical market in China shows some strain. Yangshan copper premium, a measure of China's appetite for imported copper, edged up to $45 a tonne from $38 a month ago, suggesting buyers are willing to pay more for prompt delivery.

Traders are watching the Escondida vote count closely. A strike would push concentrate treatment charges, already near record lows, even lower. Smelters would be forced to cut output or pay more for raw material, either outcome bullish for refined copper prices.

For now, the demand side dominates the chart. Copper has support at $9,200 a tonne, the June low. A break below that level would open a path to $8,800, a level not seen since March. The upside catalyst – a supply shock at Escondida – remains binary. The vote result is expected within the next two weeks.

China's trade data for July, due next week, will offer the next read on demand. Copper imports have fallen for three consecutive months. A fourth decline would reinforce the bearish demand narrative.