Copper gains supported by unexpected growth in factory activity in China

Copper yesterday settled up by 0.93% at 715.9 supported by unexpected growth in factory activity in China and a vote of approval from the U.S. House of Representatives to suspend the debt ceiling. Driven by improved production and demand in China, the Caixin/S&P Global manufacturing purchasing managers' index (PMI) rose to 50.9 in May, marking a return to growth, compared with a contraction in activity seen in the official PMI.

ING expects copper prices to remain volatile in the coming days, reacting to any policy change in China, and to average $8,500 per tonne in 2023. While copper inventories in LME warehouses almost doubled to 100,000 tonnes in the last six weeks, around 10,000 tonnes were earmarked for delivery in recent days. Copper output in Chile, fell 1.1% year-on-year in April to 417,279 tonnes, the country's INE statistics agency said. The official NBS Non-Manufacturing PMI for China was down to 54.5 in May 2023 from 56.4 a month earlier. While pointing to the fifth straight month of expansion in services activity following the removal of strict pandemic curbs by Beijing late last year, the latest result was the softest pace since January.

Technically market is under short covering as the market has witnessed a drop in open interest by -4.55% to settle at 6337 while prices are up 6.6 rupees, now Copper is getting support at 712.1 and below same could see a test of 708.1 levels, and resistance is now likely to be seen at 719, a move above could see prices testing 721.9.