Copper Price Struggling For Direction
Copper Congestion Continues
Copper prices Are caught between conflicting market signals at the moment. On the one hand, the soaring physical demand in China and weakened output from global supply leader Chile are continuing to support prices. However, the recent AI stock-rout and subsequent Democrat sweep in the US midterms are diluting demand expectations from the AI space.
Strong China Supply
In China, prices have ballooned recently with the Yangshan premium hitting its highest levels in over a decade. This comes amidst domestic production cuts this year in response to soaring ore costs which have hit producers hard. Additionally, restricted supply from overseas, especially Russia, Africa and weaker supply from Chile, means that buyers are competing harder for materials. This backdrop has been firmly bullish for copper prices and looks set to remain in place through year end with Chile forecasting lower output for the year as a whole and continued supply weakness into next year.
AI Concerns
AI demand has been another key bullish driver for copper prices this year. Given copper’s usage in chipmaking, battery development and data centres and other AI-linked infrastructure, the AI boom has had healthy signals for copper demand. However, the recent AI funding fears crisis which emerged in recent weeks and sent AI stocks and wider stock markets tumbling has raised questions over the prospects of the AI space. With the Democrats taking both houses in the US midterms, the implications for AI businesses are greater headwinds and a slowing of development particularly in areas such as data centre building which the Democrats are strongly opposing. As such, AI demand for copper could weaken into next year.
Technical Views
Copper
For now, copper prices remain rangebound between support at 6.3750 and resistance at 6.7190. While still within the bull channel which has framed price action since last year’s lows, the broader outlook remains favour of a fresh push higher and a breakout above the 6.8615 level to new record highs. However, if recent price action proves to be a top and we break the channel lows, 6.1090 will be next downside target with 5.8550 the deeper level to note.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.