The copper exchange traded note dipped Tuesday to its lowest point in almost six years as traders dumped copper on a weaker outlook in China and a potential pullback in oil-services-related industrial activity due to cheaper oil.
The iPath Dow Jones-UBS Copper Subindex Total Return ETN (NYSEArca: JJC) fell 3.4% Tuesday and was hovering around its lowest since May 2009. Over the past year, JJC declined 20.0%.
Short positions in copper are at a multi-year high as traders hold a more pessimistic outlook over China’s growth and diminished demand for the industrial metal, reports Jenny Cosgrave for CNBC.
“Copper remains our favorite short in the (commodity) complex. The fact that both local and central government balance sheets in China are at risk from declining land sales and hence lower revenues will also constrain their ability to boost growth through infrastructure investments,” Michael Lewis, head of commodity research at Deutsche Bank, said in the CNBC article. “In our view, this means markets with a disproportionate exposure to China’s property sector, like copper, are vulnerable.”
Copper also declined, along with oil prices, after the Organization of the Petroleum Exporting Countries kept output unchanged.
“Because of the drop in oil, there is just a general avoidance of raw materials on the part of investors,” Bart Melek, head of commodities at TD Securities, said in a Wall Street Journal article. “This is probably an overreaction. It’s too early to say the world is falling apart.”
COMEX copper futures are now trading around $2.64 per pound, and prices on the London Metal Exchange dipped below $6,000 per ton Monday for the first time since October 2009.