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Copper Advanced Amid Strong Factory Activity In China

Published 04-06-2024, 03:29 pm
© Reuters.  Copper Advanced Amid Strong Factory Activity In China

Copper prices surged by 0.95% yesterday to settle at 880.1, fueled by strong factory activity in China, the world's top consumer, and indications of stabilizing U.S. inflation, which reinforced expectations of the Federal Reserve's potential interest rate cuts later in the year. China's manufacturing activity in May marked its fastest pace in about two years, driven by robust production and new orders across smaller, export-oriented firms, as per a private sector survey. This contrasted with a surprise decline in the broader official purchasing managers' index. Moreover, last week's data showing stabilized U.S. inflation kept the door open for potential Fed rate cuts. 

Despite some improvement in physical demand indicated by the tightening discount to import copper into China, overall consumption remained subdued due to persistently high and volatile prices. The International Monetary Fund revised up its growth forecast for China, though it warned about risks posed by the property sector. Shanghai copper stocks have surged by 240% year-on-year, with deliveries to LME warehouses. China's daily refined copper production rate hit a record high in April, while copper inventories in Shanghai Futures Exchange warehouses reached four-year highs. The global refined copper market showed a surplus of 125,000 metric tons in March, compared to 191,000 metric tons in February, according to the International Copper Study Group (ICSG).

Technically, the copper market witnessed fresh buying momentum, with open interest increasing by 1.03% to settle at 6,165 as prices rose by 8.3 rupees. Copper finds support at 871.6, with further support at 863.2. Resistance is likely at 884.7, and a move above this level could see prices testing 889.4.

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