Copper prices may continue to remain under pressure

Futures dropped by 9% to $6380, from recent highs of $7,220 over the last few sessions, the lowest level since June 2010

Copper prices may continue to remain under pressure as prices have been falling steadily this year mostly because of tepid economic growth in China.

Copper prices, are by far the worst performer among metals this year.

Various macroeconomic influences have added to its misery, ranging from Chinese credit tightening concerns, Russia-Ukrainian tensions, sluggish Japanese data, mixed US data, muted steel demand in China to the overall slide of industrial commodities, pushing it into a bear market, commodity broker Motilal Oswal said in its commodity insight report here.

The fate of copper is a real concern now, as copper futures dropped by nine per cent to $6380, from recent highs of $7,220 over the last few sessions, the lowest level since June 2010.

Copper is already down by 13% YTD, but the demand for the industrial metal is being questioned further as China sees exports and inflation contracting at a faster rate than expected.

The benchmark Shanghai and LME copper prices have been falling steadily this year mostly because of tepid economic growth in China, which accounts for more than 40% of global demand for the metal. But after the sharp price drops in recent days following the bond default, 'would-be' importers in China are finding it tough to get credit.

"We can expect the pain to continue for a longer time than expected. Further downside to $6250-6150 per tonne looks possible, which should act as a short term bottom for prices.

"On the MCX, prices can witness a pullback towards Rs 412- 415 after which another round of selling would take it down towards Rs 385-390. We expect prices to take a hold around these levels for the short term," Motilal Oswal Analyst - Base Metals Rajni Daswani said.

In the medium term, currently low prices make it unattractive to commission new mining projects, which would tighten supply in the medium term. There is confidence that copper prices will recover significantly during the course of the year, Daswani said.