Dr Copper is a name given to copper because of its reputed ability to determine the health of the world's economy by following demand and price variants of copper. And the diagnosis is pretty grim.
Import demand from China has dropped 27% over the past 12 months and that trend is growing and when one considers the fact that China accounts for 40% of copper demand then is it any wonder that exposure is moving to short term.
However as of today the 27th of September copper has risen modestly for the first time in 8 days from $6,800 per ton, which was its 14 month low, but is that enough to convince anyone that copper is acting as anything other than a commodity bobbing up and down with other metals?
Could it be that today's increase in copper price is the result of a large investor hooray rally in the markets with more hot air than substance?
Well if you believe that copper is a halfway decent barometer for the global economy then look at two simple influences that may give a good idea of what is going on.
Firstly you need to establish ifÂ investor speculation was the prime motivator in driving copper to highs of $9,905 per tonne and if investor asset sell offs caused the metal to react so badly.
Well it certainly seems to be reacting to market surges and rallies which will cause havoc for anyone playing the shorting game but that does not explain the drop in industrial demand.
Secondly there is the demand from China and that cannot be overstated seeing as the Chinese property boom is coming to an end with high risk of exposure to the Chinese residential and commercial property market now becoming a reality and that is outside of other industrial pressures within China.
Speculation on copper is just that, but the lion's share and lows are dictated by the portion of the copper speculation based on physical demand and industrial usage and this is why Dr copper will give a pretty darn good idea of the economy when you remove the overnight hooray rally peaks and troughs.
Again many speculators are looking at Copper hitting $9,500 later this year, but that is not based on industrial demand and may have more to do with wishful thinking for those with long positions.
Time will tell but low copper demand by China does not speak to us about the state of the global economy, it shouts it.