Ongoing shortages, looser monetary policy expectations, the potentiality for being included into President Trump’s tariff agenda and robust speculative positioning, has given a bullish undertone for the base metal in recent weeks, pushing its price higher, lifting it to 4-month highs.
The most prominent reasons behind the recent rally have been the prolongment, but also the aggravation of supply bottlenecks and constraints, which distort the price equilibrium of the commodity. A big mining player Chile is currently undergoing a “lower output phase”, operations at the Grasberg mine in Indonesia remain halted at after a fatal incident and planned cuts by Chinese smelters are limiting the supply of the key metal in global markets.
On the demand side, another factor aiding the rally has been the increased shipments towards the US amid the ongoing uncertainty of whether copper will be included in Trump’s, amended, tariff agenda, forcing companies to front-run their purchases and minimize the impact. Furthermore, inventory levels at LME and COMEX warehouses remain depleted, causing imbalances in prices at the exchanges, as demand outpaces supply.
A slight drop in factory activity, with output and new orders largely remaining stagnant in China has, momentarily capped the rise of the commodity to higher ground, earlier today.
The malleable, orangey, metal has been used as a proxy of global industrial productivity by analysts from time immemorial, making it not only a key indicator of economic health, but also a pivotal gauge of demand for industrial and infrastructure developments globally. During periods of heightened demand and projections for booming manufacturing activity, commodity markets traders saw the base metal experiencing, fiery and long-lasting rallies. Indications for such prosperous times in yet to be shown clearly and for the timing being supply inconsistencies remain the main driver.
As for its applications, copper is a widely used base metal essential for electrical wiring, plumbing, industrial machinery, and increasingly in renewable energy and electric vehicles due to its excellent conductivity and durability.
Mercuria analysts anointed that we are amidst a special, generational opportunity period for trading copper and technical drive-up of its price to higher ground seems imminent, as an influx of supply constrictive factors generate an easily exploitable situation. So long a fragile supply-demand balance persists, a tip into deeper deficits over the coming years is expected.
Prominent traders have also branded copper (alongside other metals such as aluminium, nickel and silver) being in a commodity super-cycle phase, showcasing their bias that commodities have been the “forgotten” allocation option, missing from many portfolios and managers may very well soon wake up and participate in the action.
Technical Analysis
Copper Chart – Copper futures climb to 4-month highs amidst an influx of supply constraints and moderate demand
Resistance: 5.40 (R1), 5.65 (R2), 5.85 (R3)
Support: 5.00 (S1), 4.78 (S2), 4.60 (S3)