Copper exchange traded funds look tarnished, with copper futures experiencing their worst daily decline in over two years on fears that China, the world’s largest consumer of industrial metals, will cut demand.
COMEX copper futures dropped 4.2% to $3.08 per pound in afternoon trading Friday, largest decrease since December 2011.
Traders are dumping copper in anticipation rising debt and slowing growth following China’s first onshore bond default as Shanghai Chaori Solar Energy Science & Technology Co. fails to repay debt, Bloomberg reports.
“You have a lot of fear in the market right now,” Tom Power, a senior market strategist at RJO Futures, said in the article. “The potential for more default is really what’s pushing the market. The market seems to be poised for another move lower.”
The default scare comes amid broader concerns about a slowdown in industrial metal demand from China, which makes up 40% of the world’s copper demand, reports Ira Iosebashvili for the Wall Street Journal. China’s manufacturing sector slowed to a seven-month low in February.
Meanwhile, China’s stockpiles grew by 4.6% to 207,320 tons this week, a 10 week high.
“Until the Chinese economy picks up and starts using up the supply that is out there, I can’t see copper trading much higher,” James Cordier, a principal at Liberty Trading Group, said in the WSJ article. “Unfortunately, there are no signs of that happening right now.”
JJC tracks the Dow Jones-UBS Copper Subindex Total Return and CPER follows the SummerHaven Copper Index Total Return. Both indices are comprised of copper futures, but JJC only tracks one futures contract while CPER spreads out holdings over two or three copper futures contracts.
iPath Dow Jones-UBS Copper Subindex Total Return ETN
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