Copper prices are moving from a speculative surge to a correction phase, with a lack of demand acting as a heavy burden

The metal market is undergoing a major shift. Industrial metals like copper had surged well beyond their intrinsic value due to speculative buying, but such excessive buying won’t last forever. Market sentiment is gradually returning to the reality of weak demand, and metals overall, including copper, are facing correction pressures.

End of Speculative Buying and Rising Price Pressures

According to Jin10 data, industrial metals on the London Metal Exchange have declined for three consecutive days, reaching approximately $12,800 per ton. This trend started last Friday, with copper prices dropping by 2.9%. It is currently experiencing its most severe weekly performance since April.

The underlying cause is the tide of speculative money receding. For months, copper was heavily bought up by speculators, pushing prices far beyond actual demand levels. However, such speculative fervor cannot continue indefinitely. When the market cools, overvalued prices tend to correct sharply.

Inventory Expansion Indicates Supply-Demand Imbalance

The most evident sign of market weakness is the rapid increase in warehouse inventories. Inventory levels at the London and New York futures exchanges have reached their highest since 2003, signaling an overall oversupply in the market.

The reason for rising inventories is straightforward: demand remains weak while supply is plentiful, leading to a distorted supply-demand balance. As consumption outlooks worsen, inventories continue to accumulate, suggesting copper prices may face further correction pressures.

Institutional Investors Also Warn of Excessive Valuations

BNP Paribas, like Goldman Sachs and other major banks, points out that copper price levels are disconnected from fundamental demand.

BNP Paribas strategist David Wilson stated in a report that copper is “still overvalued,” and levels above $11,000 to $11,500 per ton are “supported almost solely by speculation.” In other words, at those price levels, there are hardly any genuine demand-based buyers, and prices are driven mainly by speculators’ interests.

These warnings from major institutions suggest that copper’s correction may still be in progress. Until the speculative bubble fully deflates, downward pressure on industrial metals, including copper, is expected to continue.