Copper prices fell -0.89% yesterday, setting at 726.75, driven by the stronger dollar or indications of no US rate reduce in March. Still, encouraging data out of China and tightening supply dynamics offered some consolation.
Contrary to official data suggesting pre-Lunar New Year weakness, the Caixin China General Production the Purchasing Managers Index (PMI) for January unanticipated kept at 50.8, surpassing market predicts or marking the 3rd consecutive month of rising factory activity.
Remarkably, since October, stocks in LME-registered warehouses have dropped by 24%, bringing them down to 146,475 tonnes, the lowest level since September.
In spite of this, the market appears not worried about supply shortages on the LME market based on the sizeable discount for cash over three-month copper agreements. The China Nonferrous Metals Industries Association (CNIA) advised copper smelters to reduce output and postpone new projects due to dwindling raw material supplies.
China is the world’s largest consumer of copper, but as smelters planned to expand, a major copper mine in Panama closed, posing unexpected supply challenges for copper concentrate. Leading copper smelters have suggested reducing production. But no concrete plan has been decided upon.
As per the National Bureau of Statistics, China’s output of refined copper hit a new high of 12.99 million metric tonnes in 2023, indicating a 13.5% rise from 2022.
Technically, there appears to be new selling in the market as open interest increased by 1.36% to settle at 4636. Support for copper is at 724.6, and a break below that could push prices as high as 722.4.
Resistance is anticipat at 730.5, and a move above could push prices as high as 734.2.