Copper dropped amid strong dollar and high inventories
Copper closed down by -0.61% at 713.9 due to several factors including a stronger dollar, high copper inventories, and reduced risk appetite following the Federal Reserve's indication of prolonged restrictive policies. Inventories of copper monitored by the Shanghai Futures Exchange dropped significantly, but LME-registered warehouses still held copper at their highest levels since May 2022. Additionally, data from the International Copper Study Group (ICSG) revealed a surplus in the copper market from January to July.
The discount for near-term copper delivery compared to the LME three-month contract reached a four-month high, indicating ample immediate supply. Southern Copper, a major copper producer in Peru, expected a 17% increase in copper production this year, contributing to overall output growth. In July, the global refined copper market reported a deficit of 19,000 metric tons, a significant decrease from the 72,000 metric tons deficit in June, as reported by the ICSG.
From a technical perspective, the market witnessed fresh selling with increased open interest by 24.07% to 8,238. Copper has support at 710.5, with potential testing of 707.2 if it continues to decline. Resistance may be found at 718.7, and breaking above it could lead to testing at 723.6.
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