Report on Copper | Globe Capital Market LTD.
22-Jun-2023
Report on Copper

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. Overall copper can move in range of 680-810 in MCX.

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

Globe Capital Market Limited (“GCML”) is a Stock Broker registered with BSE, NSE, USE and MSEI in all the major segments viz. Capital, F & O and CDS segments. GCML is also a Depository Participant and registered with both the Depositories viz. CDSL and NSDL. Further, GCML is a SEBI registered Portfolio Manager. GCML includes subsidiaries, group and associate companies, promoters, directors, employees and affiliates.

Globe Commodities Limited, Globe Derivatives and Securities Limited & Globe Fincap Limited are subsidiaries of GCML. Rolex Finvest Private Limited, A to Z Consultants Private Limited, A to Z Venture Capital Limited, M. Agarwal Stock Brokers Private Limited, A M Share Brokers Private Limited, Shri Adinath Advertising Company Pvt. Ltd., Orient Landbase Private Limited, Bolt Synthetic Private Limited, Price ponder Private Limited and Lakshya Impex Private Limited are associates of GCML. Globe Comex International DMCC is step down subsidiary of GCML.

This report has been prepared by GCML and published in accordance with the provisions of Regulation 19 of the Securities and Exchange Board of India (Research Analysts) Regulations, 2014, for use by the recipient as information only and is not for general circulation or public distribution. This report is not to be altered, transmitted, reproduced, copied, redistributed, uploaded, published or made available to others, in any form, in whole or in part, for any purpose without prior written permission from GCML. The projections and the forecasts described in this report are based on estimates and assumptions and are inherently subject to significant uncertainties and contingencies. Projections and forecasts are necessarily speculative in nature, and it can be expected that one or more of the estimates on which the projections are forecasts were based may not materialize or may vary significantly from actual results and such variations will likely increase over the period of time. This report should not be construed as an offer to sell or the solicitation of an offer to buy, purchase or subscribe to any securities, and neither this report nor anything contained therein shall form the basis of or be relied upon in connection with any contract or commitment whatsoever. It does not constitute a personal recommendation or take into account the particular investment objective, financial situation or needs of any individual in particular. The research analysts of GCML have adhered to the code of conduct under Regulation 24 (2) of the Securities and Exchange Board of India (Research Analysts) Regulations, 2014. The recipients of this report must make their own investment decisions, based on their own investment objectives, financial situation or needs and other factors. The recipients should consider and independently evaluate whether it is suitable for its/ his/ her/their particular circumstances and if necessary, seek professional / financial advice as there is substantial risk of loss. GCML does not take any responsibility thereof.

Any such recipient shall be responsible for conducting his/her/its/their own investigation and analysis of the information contained or referred to in this report and of evaluating the merits and risks involved in securities forming the subject matter of this report. The price and value of the investment referred to in this report and income from them may go up as well as down, and investors may realize profit/loss on their investments. Past performance is not a guide for future performance. Actual results may differ materially from those set forth in the projection.

This report has been prepared by GCML based on the information available in the public domain and other public sources believed to be reliable. Though utmost care has been taken to ensure its accuracy and completeness, no representation or warranty, express or implied is made by GCML that such information is accurate or complete and/or is independently verified. The contents of this report represent the assumptions and projections of GCML and GCML does not guarantee the accuracy or reliability of any projection, assurances or advice made herein. Nothing in this report constitutes investment, legal, accounting and/or tax advice or a representation that any investment or strategy is suitable or appropriate to recipients’ specific circumstances.

Since GCML or its associates are engaged in various financial activities, they might have financial interest or beneficial ownership in various companies including subject company/companies mentioned in the report. GCML or its associates have not received any compensation for investment banking or merchant banking from the subject company in the past 12 months. GCML or its associates might have received any compensation including brokerage services and for products or services other than investment banking or merchant banking from the subject company in the past 12 months. It is confirmed that GCML or research analyst or its associates have not managed or co-managed public offering of securities for the subject company in the past 12 months.

Research analyst or GCML or its relatives’/associates’ have no material conflict of interest at the time of publication of this report. Neither research analyst nor GCML are engaged in market making activity for the subject company. It is confirmed that research analysts do not serve as an officer, director or employee of the subject company. It is also confirmed that research analyst have not received any compensation from the subject company in the past 12 months.

No material disciplinary action has been taken on GCML by any regulatory authority impacting Equity Research Analysis activities.

The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. This information is subject to change, as per applicable law, without any prior notice. GCML reserves the right to make modifications and alternations to this statement, as may be required, from time to time.

Research analyst or GCML or its relatives’/associates’ do not have actual/beneficial ownership of 1% or more in securities of the subject company, at the end of the month immediately preceding the date of publication of the document.