Copper prices dropped over one and half percent on Monday, driven by uncertainty surrounding China’s stimulus plans, deflationary pressures in the world’s largest consumer, and a stronger dollar. Despite the downturn, higher Chinese imports of copper provided some support to the market.
Benchmark copper on the London Metal Exchange (LME) declined 1.3%, trading at $9,660 per metric ton. Contributing to demand concerns were lower-than-expected new bank lending figures from China and slowing growth in total social financing. These factors, along with deepening producer price deflation, underscore the urgent need for China to implement more robust stimulus measures to stimulate demand and economic recovery.
Although China pledged over the weekend to “significantly increase” its debt to boost growth, the absence of a specified financial package, including for the property sector, left markets unimpressed. Edward Meir, a consultant at Marex, noted, “The selloff in base metals is largely due to general disappointment with the lack of details in China’s stimulus program.” While China’s finance minister indicated that the government had room to expand its deficit and issue more debt, the failure to quantify the stimulus size dampened market sentiment.
The firm US dollar added further pressure, making dollar-denominated metals more expensive for buyers using other currencies, thus limiting demand.
On a positive note, China’s unwrought copper imports in September surged to 479,000 tons, a 15.4% increase from August. This rise reflects improving seasonal demand and a healthier outlook for copper consumption. Additionally, copper inventories in warehouses monitored by the Shanghai Futures Exchange fell to 156,485 tons, a reduction of over 50% since June, indicating firm demand for the metal used in key sectors such as power and construction.
Overall, the market’s mood soured as China’s export growth, a key driver of its economy, slowed in September, raising concerns that manufacturers are reducing prices to clear inventories ahead of new tariffs from several trade partners.
Technical Outlook – Copper Futures
Copper prices reversed from the session high of 839 and closed at 825.40, marking a 1.75% decline from the previous day’s close of 840.10.
The formation of a long bearish candlestick on the chart signals mounting short-term selling pressure. However, a decisive break below the immediate support at 819.20 would be required to target the next support levels at 815-812.50.
Alternatively, any upward move toward 828-830 is likely to encounter selling pressure in the near term. On the upside, resistance is identified at 845.00, with a break above this level potentially leading to a recovery toward 852-855.
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Commodity Samachar Securities
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