Copper up 30% but still negative for the year
Mining companies are seeing demand for copper in China steadily increase, although operations in countries such as Brazil, Peru and Chile remain disrupted.
Copper rebounding but still negative for the year
While copper prices are still down roughly 7.5% this year, the base metal has managed to rally 30% since its lows in March 2020.
Copper, often considered a leading indicator of economic health, has seen a rebound from March 2020, which has gained traction in April and has accelerated further into May and June. The metal, linked to manufacturing, construction, technology and industrial production is finding some impetus for gains from the reopening of economies around the world
Demand recovering while supply is disrupted
While the COvid-19 pandemic has disrupted the demand side for the metal, there is evidence that this demand is starting to increase once again. China the primary consumer of copper, is starting to steadily increase its imports of the commodity, as their economy becomes the first to almost fully recover from the initial onset of the Covid-19 pandemic. Recent data is also showing lower inventory levels of copper, a further suggestion of demand for the metal starting to improve.
In terms of the supply side, the temporary suspension of mining operations globally and subsequent increased safety precautions necessary have served as disrupters to output of the commodity. Major copper producing countries Brazil, Chile and Peru find themselves with a much later and more severe onset of the pandemic. These three regions fall within the top 10 countries with the highest number of active cases (as of the 9th of June 2020).
Major listed copper producers which will be influenced by movements in the copper price include Freeport-McMoRan, The BHP Group, Xstrata, Rio Tinto, Anglo American Plc and Glencore.
Spot copper technical view
A dollar denominated chart of copper shows the base metal to now be trading above the 200-day simple moving average (blue line) for the first time since January this year. The move above this average suggests that the long-term trend for the commodity is no longer down. The short to medium term trend for copper is considered up.
While the trend bias is up for copper the move higher has pushed the commodity into overbought territory. The overbought signal finds prevalence as the price moves towards resistance at 5815. In turn traders might consider looking for long entry into a pullback towards horizontal (5460) or trend line support. In this scenario a move back towards 5815 would be targeted, a break of which would suggest 6080 as the next upside resistance target to consider. A move below the dotted trend line would consider the short to medium term uptrend to be broken.
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