London copper prices were on course for a drop this week, amid concerns over the outlook for global demand and as hawkish remarks from US Federal Reserve officials sent the dollar higher.
The dollar was set for a weekly gain, after comments from Fed officials dashed investors’ hopes for less aggressive monetary policy and weighed on prices.
FOMC member James Bullard stated the central bank needs to continue raising interest rates probably by at least another full percentage point as rate hikes have had only limited effects on inflation so far.
Meanwhile, top metals consumer China struggled with rising COVID-19 cases this week, including in big cities like Beijing and Guangzhou, fanning concerns about its economic performance.
Rising copper output in China was also pressuring the market. According to data from the National Bureau of Statistics China produced 953,000 tonnes of refined copper in October, up 10.9% from a year ago.
In terms of fundamentals, LME copper stocks increased to 89,925 tonnes. In China, as the SHFE/LME copper price ratio continued to decline, the import market trading was weak, hence the inflow of imported copper will be relatively limited.
On the demand side, copper prices have bounced back in recent days, gradually improving buying interest, but buyers lowered their prices due to the bearish outlook.
This was also reflected by a drop in Yangshan copper premiums. Yangshan copper premiums continued to fall to $92.50 per tonne from $97.50, reflecting weak demand for the imported metal.
Looking ahead for next week, copper prices could continue to weaken further next weighed down by a stronger dollar and weak global demand outlook.
The driving force for copper prices will come from the improvement of macro sentiment and expected demand recovery from China and other nations
Moreover, global copper stocks have fallen to record lows, with current inventories enough to supply world consumption for just 5 days and shortage risks, which do not reflect the tightness of the physical market.
Some recovery or buying on any dips cannot be ruled out. On the charts,
copper November supports are at 670 and 663 and resistances are at 682 and 688. We recommend investors should sell on every rise for the coming week.
Among other metals, we recommend investors should sell on every rise for the coming week. MCX aluminium November supports are at 203 and 199 and resistances are at 207 and 210.
MCX zinc November supports are at 263 and 257 and resistances are at 207 and 210. MCX lead November supports are at 180 and 176 and resistances are at 183 and 186.
(Disclaimer: The author is Senior Research Analyst-Commodities & Currencies at
Securities.
Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
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