Copper fell to the lowest level in more than two months - extending a slide from an all-time high - with prices facing sustained pressure from unusually weak Chinese demand.

The metal has shed 14% since rocketing to a record above US$11,000 a ton in May. Soft market conditions in top consumer China have handed copper’s more bullish investors a reality check, and prices have continued to decline, even amid tentative signs of a demand recovery.

“The sharp rise of the copper price in May undermined downstream demand, leading to higher inventory,” HSBC Holdings plc analysts including Howard Lau wrote in a note. “However, we believe pent-up demand will gradually be released, with the price correction seen from mid-June onwards.”

Copper dropped 0.5% to US$9,519.50 a ton on the London Metal Exchange (LME) at 2.15pm in Shanghai on Wednesday, heading for a fourth daily decline and its lowest close since April 16. Aluminium and zinc also fell on the LME.

Industrial metals had staged a broad rally through mid-May on hopes for a pickup in global consumption and long-term bets on supply tightness. Still, China’s patchy economic recovery and weaker currency, as well as ebbing prospects for US interest rate cuts this year, blunted gains.

Tight labour markets, geopolitical developments, and a loosening of financial conditions all added to potential upside risks for US inflation, Federal Reserve governor Michelle Bowman said in a speech on Tuesday. She reiterated her view that borrowing costs should remain elevated.

The HSBC analysts said they are optimistic about copper demand in the second half given potential spending on China’s power grid, as well as a strong outlook for renewables, electric vehicles and manufacturing. Inventories in China have already started to fall from unseasonally high levels.

  - Bloomberg