Copper prices surged to a fresh lifetime high on MCX of Rs 717.20 per kg on February 22. On LME, copper jumped to cross the $9,000 a tonne level for the first time since September 2011, extending a rally that has been driven mainly on the expectation of a pick-up in demand after the Chinese New Year. It is now just 10 percent short of lifetime highs touched in February 2011.
One justification for the latest surge in prices is that lockdown restrictions in China mean many people are not travelling and factories are staying busy.
Inventories of copper in warehouses registered with the LME are near 2005 lows at 75,700 tonnes. Cancelled warrants - metal earmarked for delivery - account for about 39 percent and further fuelled concerns about tight supply on the LME market.
Hedge funds and money managers reduced their net long positions in copper futures and options by 358 contracts to 87,312 in the week to February 16, CFTC data showed.
LME Copper and the rest of the base metals extended gains this Monday morning in Asian trade supported by Chinese demand and supply shortage for certain metals like copper and tin.
Sriram Iyer, Senior Research Analyst at Reliance Securities said, “Technically, LME Copper hit a 52-week high at $9,177 levels where it is trading on a strong uptrend, which could further push prices to $9,200 levels while support is at $9,085-$9,040 levels.”
Tapan Patel- Senior Analyst (Commodities), HDFC Securities said, “Base metals complex witnessed strong buying with most of the metals opened higher with higher demand outlook and supply deficit fears. Copper prices traded to the highest levels since 2011 crossing above $9,000 per tonne at LME while Nickel prices rallied above $20,000 to the most since 2014. The premium for cash copper over three-month metal is rising showing tight supply in the spot market.
We expect base metals to trade higher for the short term. MCX Copper March support lies at Rs. 685 and resistance at Rs.712.
The US dollar traded higher at 90.46 or up 0.11 percent in the afternoon session.
Motilal Oswal said that the very low starting point for inventories at the beginning of this year has been further exacerabated by a counter season stock draw so far in Q1 on a scale only seen once before in recent history.
Adding to concerns about a supply squeeze are possible production cuts at a top Chinese smelter. Inventories tracked by ShFE are the lowest for this time of year in more than a decade, the brokerage firm added.
It further said that the current trend point towards a high risk of scarcity conditions over the coming months. In this context, the fundamental outlook for copper is extremely bullish with no evidence that current price levels are yet stimulating softening effects to reverse both spot and forward fundamental tightening trend.
The International Copper Study Group (ICSG) data shows world refined copper production rose by 1.5 percent for the first 10 months of 2020 but calculated that world refined copper usage increased by 2 percent over the same period, which reflected an “apparent deficit” of about 480,000 metric tons due to rebound in Chinese demand.
On the supply side, the estimated global mine production of copper was 20 million tonnes in 2020, a drop of 2 percent compared to 2019.
MCX iCOMDEX Base Metal Index was up 118.92 points, or 0.79 percent, at 15,115.89 at 14:58.
In the futures market, copper for February delivery touched an intraday high of Rs 717.20 and a low of Rs 699 per kg on the MCX. So far in the current series, the base metal has touched a low of Rs 585 and a high of Rs 717.20.
Copper delivery for February jumped Rs 11.35, or 1.64 percent, to Rs 703.60 per kg at 14:59 hours with a business turnover of 1,085 lots. The same for March contract rose Rs 7.10, or 1.04 percent to Rs 691.30 per kg with a turnover of 5,102 lots.
The value of February and March’s contracts traded so far is Rs 101.80 crore and Rs 2,710.75 crore, respectively.
At 0934 (GMT), the red metal price gained 0.78 percent, quoting at $9,011 per tonne in London.
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