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Copper prices at a high amid upbeat fundamentals; tariff threats curb gains

Date: 11-12-2019
Subject: Copper prices at a high amid upbeat fundamentals; tariff threats curb gains
Ravindra Rao

LME three-month Copper prices rallied to a high of $6084.5 per tonne (hit on July 2019)  on December 9. The metal has been gaining for four straight sessions.

The rally in metal has been on the back of upbeat fundamentals like falling stocks at LME and SHFE warehouses along with signs of robust demand from China as is evident from jump in the nation’s Copper imports.

Copper stocks at LME warehouses have declined by more than 43 percent from August high of 337,675 tonnes, and were at 190,825 tonnes as on December 9 — hovering around the lowest level since May 2019. Meanwhile, warrant stocks or material available for delivery have slid to March 2019 lows.

Furthermore, stocks at SHFE have more than halved from March 2019 highs of 2,64,601 tonnes, and are at 1,12,667 tonnes — lowest level since January 2019.

Meanwhile in China, data over the weekend showed that nation’s copper imports rose 12.1 percent in November to 13-month high at 4,83,000 tonnes versus October’s 4,31,000 tonnes. The rise in imports comes on the back of unexpected improvement in factory activity last month.

According to the official data, China’s factory activity unexpectedly expanded in November after six months of contraction. Official manufacturing PMI for the month of November rose to 50.2 from October’s 49.3; a level above 50 denotes expansion.

Apart from supportive fundamentals and upbeat factory activity from China, Copper prices have also risen seeking support from the Friday’s better-than-expected labour data from US.

US Non-Farm payrolls rose by 266,000 in November following upwardly revised figure of 156,000 in October while unemployment rate dropped to 50-year low of 3.5 percent.

Despite the above mentioned supportive factors, the rally in metal has been restrained amid lingering uncertainty over the US-China trade deal.

Both the US and China are struggling to reach a deal ahead of December 15 deadline when new US tariffs on Chinese products worth $156 billion kick in. Contradictory signals from both the nations for past few sessions have kept the markets guessing over possibility of a trade deal.

Overall, copper looks poised to trend further up supported by demand optimism and falling stockpiles, however, any negative development on trade front can potentially cut short the uptrend in metal and push it back into sub-$6,000 levels.

Source: moneycontrol.com

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