In recent weeks, copper prices have come under pressure from the slow recovery of the Chinese economy. Last week, copper prices broke through the support range of 8500-8550 and then updated the lows since late November, falling below 8150. Yesterday the buyers were trying to take back several lost positions, but they quickly ran out of steam, and today, we are seeing prices fall again. The next target for the bears might be 8050.
Negative sentiment returned to the copper market immediately after the publication of Chinese industrial production statistics for April. We saw an increase in production by 5.6% compared with last April, but forecasts suggested an even higher industrial growth rate of 10.9%. The economic performance of the Celestial Empire continues to fall short of market expectations.
Chinese industrialists are struggling with weak demand in both global and domestic markets, especially in the construction sector. While there are signs of growth in copper demand for green energy, it is not yet strong enough to offset the stagnation of the old industry.
In the first quarter of 2023, Chinese copper imports fell immediately by 16% to 700,000 tons year-on-year. Preliminary data for April shows that it was another month of low purchases. Also, weak domestic demand can be detected by looking at the sharp rise in copper exports. Outgoing shipments from China were 102,000 tons in the first three months of 2023, and this increased the same period last year by 56%.
Graeme Train, Head of Metals and Minerals analysis on Trafigura, expects Chinese demand for copper to rebound towards the end of the year. Until then, quotations of red metal will be under pressure from the negative macroeconomic background. The RSI indicator due to the price rebound in the last two days has come out of oversold and doesn’t prevent the continuation of the copper's descent to 8050.
We may offer you the following option of trading strategy:
Sell copper in the range of 8150 – 8250. Take profit — 8050. Stop-loss — 8350.
This content is for informational purposes only and is not intended to be investing advice.
