Uh-oh! Are ASX copper shares about to hit a speed bump?

ASX copper stocks could be about to hit a rough patch. But why?

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If you bought ASX copper shares late in 2022, congratulations!

On 20 October 2022, the red metal was trading for US$7,550 a tonne.

Amid surging demand and limited new supplies, the copper price then rocketed to near all-time highs of US$10,890 on 20 May.

Now there aren't many pure-play ASX copper shares to choose from. At least, not on the larger end of the market.

Back on 20 October 2022, Sandfire Resources Ltd (ASX: SFR) was the only S&P/ASX 200 Index (ASX: XJO) miner to really fit that bill.

Since then we've had dual-listed, Canadian-based Capstone Copper Corp (ASX:CSC) join the ASX on 8 April 2024.

But if you wanted to stick to established, copper focused miners on the ASX in 2022, Sandfire was the way to go.

And what a run it had.

From 21 October 2022 through to 20 May 2024, the Sandfire Resources share price soared 203%.

With copper prices having since retraced to US$9,786 a tonne today, the Sandfire Resources share price has fallen 13% since 21 May.

So are the good times over for ASX copper shares like Sandfire Resources and Capstone Copper?

Chinese inventories could hit ASX copper shares

Well, over the shorter term, ASX copper shares could face some bumps in the road amid fast-building copper inventories in China.

According to Bloomberg data, copper inventories in Chinese warehouses are at the highest levels in four years.

With China's struggling property markets and tepid industrial sector, manufacturers have been delaying new purchases amid the historically high copper prices.

"If you're a copper manufacturer in China, then you have every incentive to run down your own stockpiles and hold off buying from the market because demand is OK but not stellar and global prices have surged," David Wilson, commodities strategist at BNP Paribas said (quoted by The Australian Financial Review).

And ASX copper shares could come under more selling pressure if prices for the red metal continue to slide, as some analysts are cautioning.

"China has hit a soft patch," Daniel Smith, head of research at London metals brokerage AMT said. He added that the copper price "could go back down to $US9,000 per tonne," if funds turn bearish on the outlook for the metal and begin to short it.

The bigger global picture

All commodities are subject to cyclical price moves.

While the copper price could well retrace to US$9,000 per tonne, as Smith suggested, ASX copper shares are still eyeing significant long-term demand growth for the red metal.

According to Bloomberg Intelligence's global head of metals & mining, Grant Sporre, and senior analyst Rob Barnett:

Global copper consumption is likely to be 2 million tonnes higher by 2030, with over half from the US, as power-hungry AI fuels data-centre capacity growth.

Powering data centres via copper-intensive renewables and reshored manufacturing is set to spur US needs (stagnant for a decade), lifting worldwide demand to above-trend 2.7% to 3% annual growth.

Citi also remains bullish on the outlook for copper.

"Citi's global commodity team continues to highlight copper as their top pick," Citi analyst Paul McTaggart said last week.

The broker recently lifted its 2025 forecast for the copper price to US$12,000 per tonne.

If Citi has that right, ASX copper shares like Sandfire Resources could again deliver some market-smashing gains.

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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