Copper prices experienced a decline of -0.89% yesterday, settling at 726.75, influenced by a stronger dollar and indications of no U.S. rate cut in March. However, positive data from China and tightening supply dynamics provided some support. The Caixin China General Manufacturing PMI for January unexpectedly held at 50.8, surpassing market forecasts and marking the third consecutive month of growth in factory activity, contrary to official data indicating pre-Lunar New Year weakness.
Notably, stocks in LME-registered warehouses have decreased by 24% since October, reaching their lowest point since September at 146,475 tons. Despite this, the significant discount for cash over three-month contracts suggests the market remains unconcerned about supply shortages on the LME market. The China Nonferrous Metals Industry Association (CNIA) recommended copper smelters cut production and delay new projects due to tightening raw material supplies. China, the world’s top copper consumer, has faced unexpected challenges with copper concentrate supplies after the closure of a major copper mine in Panama, coinciding with smelters’ expansion plans. Top copper smelters have proposed production cuts, though no specific plan has been agreed upon. In 2023, China’s refined copper output reached a record high of 12.99 million metric tons, reflecting a 13.5% increase from 2022, according to data from the National Bureau of Statistics.
Technically, the market is undergoing fresh selling, with a 1.36% increase in open interest, settling at 4636. Copper finds support at 724.6, and a breach below could test 722.4 levels. Resistance is anticipated at 730.5, with a move above potentially leading to prices testing 734.2.