Copper prices rose by 1.43% yesterday, settling at 868.25, buoyed by a weaker dollar and indications that the surge in exchange stockpiles may be abating, despite tempered demand prospects in China. The support from a weaker dollar was complemented by U.S. producer prices rising moderately in June, reinforcing expectations for a potential interest rate cut by the Federal Reserve in September. Inventory dynamics played a crucial role in market sentiment. Copper inventories in LME-registered warehouses remained elevated, hovering near their highest levels in over 2-1/2 years.
However, there was a notable decline in on-warrant stocks, which dropped to 190,500 tons following a significant amount marked for delivery out. On the global front, the International Copper Study Group (ICSG) reported a surplus of 13,000 metric tons in the refined copper market for April, down from 123,000 metric tons surplus in March. Despite the surplus, the market showed improvement year-on-year, with a surplus of 299,000 metric tons for the first four months of the year, compared to 175,000 metric tons surplus in the same period last year. Concerns over demand persisted, particularly from China, where unwrought copper imports dropped to a 14-month low in June due to high global prices and subdued domestic demand. The Yangshan copper premium, an indicator of China's spot import appetite, remained negative throughout June, reflecting weak import sentiment despite a modest increase in imports for the first half of the year.
Technically, the copper market saw short covering as open interest declined by 11.69% alongside a price increase of 12.25 rupees. Support levels for copper are identified at 855.7, with potential downside testing at 843.2, while resistance is expected at 875.1, with a breakout potentially pushing prices towards 882.