Inspenet, July 1, 2023.
The fate of the copper rally is uncertain, but from a technical perspective, the price action has yet to confirm a significant uptrend.
The latest report from the LME (London Metal Exchange) Traders’ Commitment found that copper mutual funds have returned to a new long position after a brief net short position at the end of May.
The price of this countless-use item is 17% lower than March 2022 levels. This is an essential raw material for electric vehicles whose purpose is to transform energy and eliminate carbon emissions .
The long-term bullish narrative fueled by projected supply shortages remains a valid concern for markets. However, LME inventory stocks continued to trend higher as they have since January.
What awaits copper towards the end of the year?
Better expectations for the US economy and stimulus measures from China could start to see those levels fall. Meanwhile, China’s copper imports rose more than 9% m/m in May. If this trend continues, markets may start to feel the pressure of tight supply once again.
Despite ten consecutive increases, the US Federal Reserve. (FED), decided to keep interest rates stable, but projected additional increases by the end of the year, which impacted the price of copper due to its inverse relationship with the US dollar index.
The Fed’s current hike of +500 basis points is the biggest since it was raised to 20% in 1980 and 1981 to combat runaway inflation.
Peru is the second largest copper producer in the world, but if it does not have new projects for this metal, this position in the ranking could be diminished and consequently it would have an economic impact for the country.
In general, the outlook for copper prices towards the end of the year is uncertain. The two macroeconomic forces mentioned above are likely to continue to play a tug-of-war on prices. The direction of prices will depend on which force is stronger at any given time.
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