Copper Market News and Analysis

Copper prices are expected to rise further after reaching an 11-month high. The price of copper rose sharply this week after reports emerged that China's largest copper smelters were considering production cuts, potentially creating a supply shortage of refined copper. The move also comes amid ongoing disruptions to copper mining in Chile and Peru, the world's largest producers of copper ore.

Copper News

Supply squeeze: China's top copper smelters might cut production, potentially leading to a shortage of refined copper.

• Copper smelters in China are cutting production due to a lack of raw materials. This shortage stems from high smelter capacity and mine disruptions globally. The cuts aim to stabilize the market but new smelter projects outside China could create future supply challenges. Copper prices are rising on these concerns.

Disruptions: Ongoing mining issues in Chile and Peru, the world's leading copper ore producers, further tighten supply.

• Potential for El Niño Impact: This weather phenomenon can bring heavy rains and floods, which leads to disruption of mining operations.
• Social and Industrial Pressures: Ongoing tensions between mining companies and local communities over environmental and social impacts can lead to protests and disruptions.

Price surge: Copper futures on major exchanges hit new highs on the news.

Market Analysis

We believe copper prices could rise further due to supply constraints. Plus, global demand for copper is growing due to the recovery in production, and China is also supporting metal-consuming industries such as the automotive industry, which drives up demand even more.

Technical analysis

Technical analysis of the copper price based on resistance zones and Fibonacci retracements.

• Resistance Zone: Copper is currently trading within a resistance area that's been in effect since May 1st, 2023. This zone ranges from $3.9632 to $4.0232 per pound. Prices have previously been rejected at this level in August and December of 2023.
• Fibonacci Retracement: The analysis mentions two Fibonacci retracement levels within the resistance zone:
  • $3.800 - is a potential support level if the price breaks below the resistance area. In December, the price reversed after hitting this level.
  • $3.7411 - is another potential support level if the price falls further after dropping below $3.800. In August, the price reached this level before reversing.
• CCI Pattern: The analysis suggests that the current pattern on the Commodity Channel Index (CCI) indicator is similar to the one that preceded the August 2023 peak. The CCI is a technical indicator used to assess whether a security is overbought or oversold. Note: on the chart we’ve also used RSI, it has a similar function.

Overall, the analysis suggests that copper might be facing resistance and could be due for a pullback if it fails to break above the $4.0240 level.

Market Opportunities Based on Analysis

Let’s explore Long-Term and Short-Term Opportunities

• Copper miners: Companies with strong copper production capacity could benefit from rising prices.
• Copper ETFs: Exchange-traded funds that track copper prices offer a diversified way to play the copper market.
• Copper futures contracts: Experienced traders can potentially profit from further price increases using copper futures contracts.
• Call options: Buying call options on copper futures allows for leveraged gains if prices rise sharply. (Note: This strategy involves higher risk)

Conclusion

Overall, copper's bullish outlook is based on potential supply tightness and improving demand, suggesting further price gains. While some economic uncertainties remain, the overall sentiment leans positive for copper.

Key takeaway: Investors and traders with a bullish copper view have long-term and short-term opportunities to consider.

Please do your own research as well, before starting to trade.