The global energy crisis is casting a shadow over copper as investors, who are optimistic about its long-term prospects, fear that power shortages and slowing factory output could trigger a retreat in the near term.

As a reliable indicator of economic health, copper is fast becoming a canary in the coal mine for analysts and academics, who fear a surge in natural gas and electricity prices will shake up markets. This could trigger stagflation, where demand from consumers and producers falls but the cost of goods and raw materials remains stubbornly high.

However, energy is not the only weight of copper, the metal that builders, carmakers and electronics manufacturers need. The risk of a collapse in China's debt-laden property sector, plus the ongoing economic threat posed by the Covid-19 delta option, are prompting investors to pull back and wait on the sidelines - at least for the moment.

"There are some headwinds in the short term, mainly because of concerns about the Chinese economy," said Jay Tatum, portfolio manager at New York-based Valent Asset Management. "But once the world returns to a normal growth rate, evenly spread across the economy, we still think there is a strong case for metals such as copper . "

The surge in copper prices above $10,700 a tonne occurred in May, when prohibition restrictions triggered an insatiable demand for the metals in housing and consumer goods. Numerous traders and banks bet on prices to rise even more, assuming the manufacturing boom would be linked to long-term plans for electric cars and renewable energy.

Bank of America Corp. said $20,000 could be possible if serious supply-side problems arise at the same time.

Instead, the copper price fell to around $9,300 because of the property crisis in China and the delta option that rattled the markets. And then there was the energy crisis as economies emerged from the pandemic and began to thirst for coal, gas and renewables while supplies fell. Citigroup Inc. - one of copper's biggest backers earlier this year - now warns that prices could fall another 10 per cent and demand could shrink over the next three months.

"What has made me outright bearish is the energy, coal and gas crisis," said Max Leighton, managing director of commodity research at Citigroup in London. "What's worrying is that it's getting much worse."

China's biggest consumer said on Friday it would allow energy-intensive companies to raise electricity prices by 20 per cent, with most of its provinces restricting power consumption. Manufacturing activity declined last month for the first time since the pandemic began.

In Europe, an IHS Markit indicator measuring business activity in manufacturing fell last month for the biggest difference since April 2020, the start of the pandemic. Growth in new orders, production and employment slowed significantly after companies such as CF Industries, Yara International ASA and BASF SE said they were cutting production because energy costs were too high.

As spot demand for copper remains high for the time being, the default position of investors seems to be inertial. Speculative positioning on both London and New York contracts has fallen to pre-pandemic levels, although prices remain around 50% higher than at the end of 2019, trading at $9,368 per tonne.

So far, fears of widespread industrial blackouts have not materialised. US production in September increased at the fastest pace in four months, with 17 industries reporting growth. Congress is also debating President Joe Biden's economic agenda of more than $1 trillion in domestic spending.

For Trafigura Group, the world's largest copper trader, confidence in the price outlook remains off the charts as demand continues to rise and global inventories get smaller.  And while the risks of an energy crisis hitting producers are growing, there is so far a greater impact on copper supply as energy-intensive smelters cut output.

"Macro headwinds aside, if you look at the speed at which stocks are rising globally, it is clear that the market is facing significant shortages," said Kostas Bintas, head of copper trading from Geneva. "It was the micro picture that made us right last time, and it is the micro picture that gives us confidence now."

Some traders, including Thai โบรกเกอร์ Exness specialists, have stressed that the short-term suffering from the energy crisis could prove a boost in the future if they encourage politicians and businesses to invest in renewable energy systems that require huge amounts of copper. Most countries have published plans to achieve zero carbon emissions in the coming decades.

"The market feels more and more that we are loading the spring," said Valent's Tatum. "The longer we load the spring, the more pronounced the response will be."