Overview and Outlook

Red metal Copper has seen roller coaster ride in 2023 as Copper started the year with positive note but traded sideways and plunged lower in months of April and May as it slumped almost 6% in May, pressured by the sluggish pace of metals demand recovery in China and fear of US debt limit default. Business confidence for the coming 12 months fell to a seven-month low amid concerns over global economic prospects. China’s construction industry is stagnant, Chinese Yangshan copper import premiums at $37.50 a tonne stuck well below their long term average, and copper stocks in LME warehouses have almost doubled since mid-April to 100,000 tonnes.

Moreover concerns of a global economic slowdown due to interest rate hike by the various central banks to curb inflation kept the prices downbeat. Also the sharp bounce back in dollar index kept price under pressure.

Copper prices have remained subdued in past few months but managed to recover in this month of June as weaker dollar and hopes of more stimulus to bolster economic growth in China may provide some support. China’s factory activity unexpectedly swung to growth in May from decline, a private sector survey showed, driven by improved production and demand, helping struggling firms that have been hit by slumping profits.

China is working on a new basket of measures to support the property market after existing policies failed to sustain a rebound in the ailing sector. Growing fear of global recession, tepid demand in top consumer China and improving supply may pressure the market. The International Copper Study Group estimates the global refined copper market registered a hefty 332,000-tonne supply surplus in the first quarter of the year, compared with an 8,000-tonne surplus in the year-ago period.

In near tem stronger dollar index and monetary tightening could cap the upside in red metal but fall in inventories and supply side issues in some mine may support the prices. Overall copper can move in range of 680-810 in MCX

Factors impacting Copper prices

China cut lending rates

China cut its key lending benchmarks, the first such reductions in 10 months as authorities seek to shore up a slowing economic recovery, although concerns about the property market meant the easing was not as large as expected. The one-year loan prime rate (LPR) was lowered by 10 basis points to 3.55%, while the five-year LPR was cut by the same margin to 4.20%.

 Decline in China Copper imports

China’s copper imports slid 4.6% in May from a year ago, customs data showed, as soft demand amid a shaky economic recovery in the world’s top metal consumer dampened buying appetite while domestic production remained high. Imports of unwrought copper and copper products totalled 444,010 tonnes in May, according to data from the General Administration of Customs.

Rise in Copper production

Global refined copper production is expected to rise by about 4.3% in 2022 and 3.6% in 2023, mainly supported by the continued expansion of Chinese electrolytic capacity and new and expanded operations in the Democratic Republic of Congo (DRC).

Fed Holds Rates Steady, But Forecasts More Hikes

Meanwhile, the United States Federal Reserve confirmed market expectations, deciding to hold interest rates at their current level following ten consecutive increases. However, the group also signaled that rates would increase by another 50 basis points by the end of December. The next hike could occur as early as July as the FOMC continues to monitor inflation, the resilient labor market, and credit conditions.

Copper warehouse stocks at LME

LME stocks have shown steady rise as it increased from nearly 55000 tonnes to 100000 tonnes in the month of May 2023 but dropped sharply to near 80000 tonnes recently. Since the beginning of the year it hovered between nearly 50000-100000 tonnes.

Weekly Chart of Copper (COMEX)

Analysis

Analysis:  COMEX Copper prices have seen steady upside movement since the last month as it took support near $3.5. However prices are expected to face resistance near $4- 4.30 zone in medium term. Prices are above 50 and 20 day moving average . On weekly chart it has key support near $3.5 and resistance near $4.3 in COMEX.

Weekly Chart of Copper (MCX)

Analysis

MCX Copper prices have shown steady recovery since the May as it took support near 690-680 range. Prices are above 50 day moving average. On weekly chart it has key support near 680-690 range and resistance near 800-810 in MCX.

Disclosure

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