Copper prices have hit a new weak spot after another round of lackluster data from China spooked investors, and analysts at Goldman Sachs don't anticipate an improvement.
The continued weakness in the red metal – seen as an economic bellwether because it's used in a wide range of products and industrial applications—came as data from China on Wednesday showed factory output slowed to a seven-month low of 5.6 percent in October, while investment expansion slipped to the weakest pace since 2000.
Three-month copper futures on the London Metal Exchange traded around $4,930 a ton in Asian hours Thursday, higher than its last settlement but near this year's bottom of $4,855 a ton. The year-low, hit in August, was the metal's weakest since July 2009. Prices have fallen over 20 percent since the beginning of 2015.
And, as with many other commodities, copper's story is not encouraging despite an earlier slowdown in supply growth, because output from previous investment will come on-stream just as cuts in consumption bite.
Goldman Sachs said in a report Wednesday that five major mines would start up or expand output significantly through 2016 and 2017, underpinning a forecast acceleration in mine supply growth of least 3 percent over the two years. Supply growth is just at 1 percent in 2015 on the back of low prices.
"Ongoing price weakness, in spite of price-related output cuts, is consistent with our view that producers do not move markets into deficit by cutting supply...rather they move markets closer to balance (than they otherwise would be)," Goldman Sachs' analysts wrote.
To move into a supply deficit - which would help prices - the market needed to see some recovery in demand and discipline in supply management, Goldman added.
But the outlook for consumption is not encouraging.
"We assume that a modest demand recovery in China will absorb most of this [additional copper] supply, however our conviction level in the demand recovery is not high," the analysts wrote in the note.
Goldman Sachs forecasts copper prices to fall to $4,800 a ton by the end of the 2015 and $4,500 a ton by end-2016 on headwinds from China, which accounts for nearly half of global copper demand.
Not all commentators, however, anticipate further downside.
London-based Capital Economics said in a note Wednesday that copper's fundamentals were starting to improve.
"Copper might have already have been expected to be doing a little better, given the mounting evidence of supply cuts in response to the previous sharp falls in prices. Confidence in China is also showing some signs of recovering as more policy stimulus is introduced, at least judging by the rebound in the equity market," analysts Julian Jessop and Caroline Bain wrote in a note.
China's demand for copper picked up too, they added, as imports rose 5 percent on-year in October.
"It may take some better news on China's manufacturing sector to turn sentiment around, but that should not be too long in coming either," the analysts wrote.
The research consultancy has kept its end-2015 copper price forecast at $5,500 a ton and $7,000 a ton for end-2016.