Copper Rose Buoyed By A Potential Output Cut In China.

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Copper Rose Buoyed By A Potential Output Cut In China.

Copper prices surged by 1.34% yesterday, settling at 762.25, following a rally in London that saw prices reaching a 10-month peak. The bullish sentiment was fueled by news of a potential output cut in China, the world's top copper producer. Major Chinese copper smelters have agreed to reduce operation rates, adjust maintenance schedules, and delay new projects in a concerted effort to bolster prices. Tight supplies of copper concentrates and lower processing fees have prompted China's North Copper to consider scaling back output in the future. This agreement among Chinese copper smelters to decrease production comes amidst mounting losses in the country's copper industry in recent months. 

However, the situation is complex because of the imminent launch of new global copper smelters with a combined capacity exceeding 1.7 million tonnes per year. This expansion in global smelting capacity could pose challenges to price stability in the copper market. Furthermore, disruptions in copper mining operations and the expansion of smelting capacity worldwide have led to a shortage of copper ore. Consequently, China's leading copper smelters have opted to cut output at some of their loss-making facilities, adjust maintenance plans, and postpone new projects to address the supply-demand imbalance. 

From a technical perspective, the market observed short-covering, indicated by a 4.82% drop in open interest to settle at 3,886, alongside a price increase of 10.05 rupees. Copper is currently finding support at 755.5, with a potential downside towards 748.7, while resistance is expected at 766.9, with a potential breakout leading to a test of 771.5 levels.

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