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Copper - October 23, 2021 - Weekly Wrap - Reliance Securities

Posted On: 2021-10-23 14:48:13 (Time Zone: IST)


Mr. Sriram Iyer, Senior Research Analyst at Reliance Securities

RECAP

Copper prices fell this week pressured by uncertainty over China's moves to dampen down coal prices and as speculators squared positions ahead of the weekend.

Prices had rebounded in the early half of the week on renewed worries about scarce supplies.

On-warrant LME inventories, those not earmarked for delivery, have fallen to 65,500 tonnes from almost 240,000 in August and capped downside in prices.

Logistics bottlenecks have helped drive copper stocks to historically low levels in regions that use the metal and helped prices.

Other metals too fell this like aluminium which hit their lowest levels in more than a month on tumbling Chinese coal prices.

Additionally, rising aluminium inventories in China also weighed on prices, with Shanghai stocks up for 4 straight weeks and social stocks in China at their highest level since May 27 at 957,000 tonnes.

On the data front, China's economy grew by 4.9% in the 3rd quarter, its slowest pace in a year, hurt by power shortages, supply chain bottlenecks and troubles in the property market.

Production at U.S. factories fell by the most in seven months in September.

Both data was negative for prices.

OUTLOOK

Looking ahead, prices are not expected to decline much more, however, because the energy crunch is expected to keep supply constrained.

We expect to see higher metals prices going forward. We think the supply situation will deteriorate further before it gets better.

However, market will continue to remain uncertain over the next few weeks until clarity emerges from the Chinese power sectors and supplies.

Additionally, the U.S. central bank should begin reducing its asset purchases soon and could cap upside in prices.

So, markets could continue to consolidate ahead of the Fed meeting the first week of November.

Ahead of the Fed meeting, the ECB also expected to meet next week.

Investors expect the Fed and European Central Bank will keep rates low for too long.

On the macro economic front, U.S. GDP, jobless claims, durable goods orders and the Fed favoured PCE Price index will be the driving factors for prices.

Across the Atlantic, GDP data from Germany will also move the markets.

Technically, if LME Copper trades below $9800 levels, it could see sideways to marginal downside momentum up to $9580-$9400 levels. A trade above could push prices to the resistance zones at $9910-$10100 levels.

Domestically, if MCX Copper October trades below 765.00 levels, it could see a trade down to the support zones at 750.00-730.00 levels. A trade above could push prices to the resistance zones at 769.00-788.00 levels.

Disclaimer: The recommendations, if any, made herein are expression of views and/or opinions and should not be deemed or construed to be neither advice for the purpose of purchase or sale of any security, derivatives or any other security through RSL nor any solicitation or offering of any investment /trading opportunity on behalf of the issuer(s) of the respective security(ies) referred to herein. These information / opinions / views are not meant to serve as a professional investment guide for the readers. No action is solicited based upon the information provided herein. Recipients should rely on information/data arising out of their own investigations. Readers are advised to seek independent professional advice and arrive at an informed trading/investment decision before executing any trades or making any investments. While due care has been taken to ensure that the disclosures and opinions given are fair and reasonable, none of the directors, employees, affiliates or representatives of RSL shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including lost profits arising in any way whatsoever from the information / opinions / views contained herein.


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