Copper Prices Find Support after Hitting Three-Month Lows

Copper Analysis

Copper prices have been tumbling for the last two months and posted their sixth straight losing week, breaching the 4.000 handle for the first time since August. Refined coper output has jumped 5% in the first eight months of the year according to the International Copper Study Group (ICSG), with capacity and capacity utilization also on the rise ^[1]. This creates concerns around excessive supply, just as demand worries are strengthening. ICSG estimates a surplus of 469K metric tonnes this year, as production is set to outpace demand. Weighing further on sentiment, is the electoral victory of Mr Trump in the US. The President-Elect has vowed to unravel clean energy policies of the current administration and to impose tariffs against China, which could sap demand of the world's largest consumer. These unfavorable dynamics expose Copper 3.919, although more intense weakness that would lead to new 2024 lows (3.652) has a higher degree of difficulty.

Copper already bounces off the 4.000 handle, largely helped by Beijing's action to cancel tax rebates for exports of the non-ferrous metal ^[2], easing oversupply concerns. Despite a potential slowdown under a Trump administration, the road to net zero seem inescapable. Furthermore, the AI boom is poised to continue to drive copper demand, since it is widely used in semiconductor industry which is set for significant growth tis year and the next. As a result, Copper can extend its rebound towards the EMA200 (back line). Daily closes above it shift bias to the upside, but multiple technical hurdles loom that could contain further strength.