Details Cookies
Cookie Policy

This website uses cookies to offer you a better browsing experience by enabling, optimising and analysing site operations, as well as to provide personalised ad content and allow you to connect to social media. By choosing “Accept all” you consent to the use of cookies and the related processing of personal data. Select “Manage consent” to manage your consent preferences. You can change your preferences or retract your consent at any time via the cookie policy page. Please view our cookie policy here and our privacy policy here

Copper points to more market weakness ahead Copper points to more market weakness ahead Copper points to more market weakness ahead

Copper points to more market weakness ahead

Ole Hansen

Head of Commodity Strategy

Summary:  While global stocks are trying to recover we maintain a close focus on copper and other pro-cyclical commodities. This in order to gauge the short to medium term economic impact of the current virus outbreak.

Despite seeing a continued rise in the number of coronavirus cases in China and abroad global stocks, led by the U.S. have once again managed to shrug off the apparent risk to global growth and demand. While  Commodities meanwhile tell a different story and the question remains which one is right. China, representing a major share of global growth is currently being challenged with the travel ban, extended holiday and factory closures all pointing towards a period of weakness.

Once the virus outbreak is brought under control the Chinese government will undoubtedly step up its efforts to boost the economy through increased spending on infrastructure and major projects. Until then several commodities deriving a big chunk of their demand from China are likely to be watched closely in order to gauge the short to medium term impact on the global economy.

Apart from crude oil and iron ore, copper is one of the key commodities to watch. The table below from Bloomberg highlights why that is. China accounts for close to 50% of global copper usage and since the virus began receiving increased attention the price has slumped by 10% thereby triggering the worst stretch of declines in decades.

The big question the market is currently asking is how long Chinese factories will be closed due to the current travel restrictions and extended holiday period. These uncertainties have seen the 2020 outlook for copper suffer a dramatic turnaround. From focusing on a global recovery, not least in China and tight supply the market is now more worried about lack of demand.

These developments have led to copper once again becoming a favored short from macro funds seeking a hedge against a global slowdown led by China. Overall the net position held by hedge funds have been hovering close to neutral during the past few months. So while crude oil’s sharp sell-off has been driven by long liquidation as the focus turned from supply disruptions to demand woes, copper has seen a lot of fresh short selling.

A development that will support a relatively strong recovery – from short covering – once the virus focus fade. While stocks are showing signs of stabilizing copper has only managed to recover one-tenth of the recent sell-off. We have to conclude that more weakness across markets are more likely than not and with that the stock markets first attempt to recover may end up being premature.

From a technical perspective a break above $2.615/lb could signal some additional short covering towards $2.70/lb while further weakness could drive the price closer to key support just below $2.50/lb, an area from where the market bounced on two previous occasions in 2017 and 2019.

Source: Saxo Bank

Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (
- Analysis Disclaimer (
- Notification on Non-Independent Investment Research (

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000

Contact Saxo

Select region


The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.