Copper prices soar on supply disruption, lower inventory; speculator cut net long positions

MCX METLDEX rose 159 points, or 1.04 percent, at 15,412 at 20:11. The index tracks the real-time performance of key base metals.

“Worries over a potential strike intensified at BHP's Escondida and Spence mines situated in major Copper producing nation, Chile, after a union representing the workers rejected the company’s recent offer. While the unions are looking to add to their existing contracts and benefits following the recent surge in Copper prices across borders; BHP stated that the two parties could still reach an agreement”, Yash Sawant, Research Associate, Angel Broking Ltd.

Spence produced 146700 tonnes of Copper in 2020 while the world’s largest copper deposit, Escondida, production stood at 1.19 million tonnes in a similar time frame.

While stalling demand from top consumer China has kept the markets cautious; mounting worries of possible supply disruption might levy some support for Copper prices.

Tapan Patel- Senior Analyst (Commodities), HDFC securities said, “Copper prices may resume uptrend over supply disruption fears from Chile. Workers at BHP Group’s remote operations centre in Santiago rejected the company’s final wage offer, with almost 97% of the union’s members opting to strike. The miner now has the right to call for government mediation that could last as long as 10 days.”

Patel expects base metals to trade sideways to up with MCX Copper May futures have near term resistance at Rs 810 and support at Rs 760 for the short term.

Chinese Yangshan import premiums slipped to $38 a tonne, the lowest on record as the high copper price appears to have curbed demand. 

Copper speculators cut their net long positions by 5,389 contracts to 61,033 in the week to May 11, the U.S. CFTC data showed.

LME supplies for copper are in deficit for the day which may strengthen the bull run.

The US dollar traded weaker at 90.25, down 0.07 percent in the evening session against the rival currencies.

Technicals

The non-ferrous metal has been trading higher than 20, 50, 100 and 200 days' moving averages but lower than the 5-day moving average on the daily chart. The momentum indicator Relative Strength Index (RSI) is at 64.29, which indicates positive movement in prices.

At 14:47 (GMT), the red metal price gained 1.23 percent to quote at $10,358.50 per tonne in London.

Trading Ideas

Neha Qureshi, Technical Analyst at Reliance Securities

“LME Copper could see a sideways momentum where support is at $10,140-$10,095 levels. Resistance is at $10350-$10490 levels. MCX Copper May could see a sideways to marginal upside momentum up to Rs 778-781 level. Support is at 774-771 levels.”

She advised her clients to buy Copper May on dips at Rs 776 with a stop loss at Rs 774 and a target of Rs 780.

Kshitij Purohit, Product Manager, Currency & Commodities, CapitalVia Global Research Limited

The market has been sustaining below 50-SMA and trading in a sideways trend where support is at Rs 769-765 levels. We may expect the market to bounce from the support levels and trade with bullish momentum in the coming sessions.

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