Analysts say that a combination of sluggish Chinese demand and rising inventories will likely cause funds to withdraw from the copper markets, adding further pressure to the prices, which have fallen around 12% in just one month since they reached record highs.

The funds will be returned as the shortages in metals are created by the significant growth of demand from the electric vehicles sector, and as new applications like data centres begin to appear.

The lower dollar also fueled the buying frenzy last month. Dollar-priced metals become cheaper to holders of other currencies when it falls. There were also concerns over supplies due to concentrate shortages.

The London Metal Exchange's (LME) prices of copper, used in the production of wires for distributing electricity, reached a record-high of over $11,100 per tonne on 20 May. This represents a rise of almost 25% within just seven weeks. Now they are around $9,700.

Investors still have a lot of copper on their speculative portfolios. "I think it will continue to fall," said Dan Smith. He is the head of research for Amalgamated Metal Trading.

"China is in a weak patch." This will influence what investors do in the coming months, he said.

Copper also reached all-time records last month, above $11,460 per tonne at the CME. As of June 11, money managers still held net long positions on CME Copper, but the price has dropped 27% since its three-year high on May 21.

Prices will only rise again if there is a pickup in demand from China. Otherwise, they are likely to remain below $10,000. Robert Montefusco, broker at Sucden Financial, said that we need to improve fundamentals and not just buy on speculation.

China's consumption, which accounts for about half of the global copper demand, estimated at 26 million tonnes in this year, is soft, partly because its property sector has been troubled and manufacturing activity is weak.

Eleni Joannaides, an analyst at Wood Mackenzie said that the construction industry in China was the main problem. She added that a price of between $9,000 and $9,500 for copper would be more realistic.

Sources say that the copper stocks in Asia delivered to LME warehouses, mainly from China, are showing a tepid demand. They total 165,175 metric tonnes. On June 20, the prices have increased by nearly 60% since mid-May.

In warehouses monitored the Shanghai Futures Exchange, copper stocks rose by nearly 90% to 322,910 metric tonnes since January.

A copper rod manufacturer said, "We are seeing a slowdown in orders from the power and automobile sectors."

Investors will continue to be a part of the market despite a lackluster demand. Citi analysts expect the copper demand to increase 90% from 2024 to 7.6 million tons in 2030.

"About 18-24 month ago, we started to see a significant investment in commodity teams from multi-manager funds, macro and quantitative funds. Guy Wolf, Marex’s head of Market Analytics, said that this was not a "fad" as the investment was very serious.

Why do financial institutions hire commodity experts?

Franck Borgel is a managing director of Societe Generale Corporate and Investment Banking.

I see more and players who are well-positioned to benefit from the market opportunities going forward. Reporting by Mai Nguyen in Hong Kong, writing by Pratima Dasai and editing by Jan Harvey