Copper is not preforming on the back of disappointing economic data from the number one consumer of the metal, China. Industrial Production came in less than expected and down 0.4% from the previous month. The figures for the last 12-months have been oscillating around 8.9 to 11.2% and it is starting to relay a story of stagnant growth from the region.
In addition to this the 10k tonne deficit that the market was expecting would be in question as the forecasts for growth for the region is remaining mixed. In fact copper imports to China over the last month dropped by 20%. Although, the Spring Festival had a lot to do with this drop the expectations for demand moving forward has had to be revised.
Economic numbers are simply not providing the back up required to keep the metal with in the range. In addition to this inventories on the LME have increased to levels not seen since June 2010, which is adding additional pressure to the already negative sentiment we are seeing. As mentioned the link between economic and activity and demand for primary inputs is still questionable. We continue to feel that growth from China will result in consumption picking up and the anticipated deficit will emerge, however we need to see more solid evidence that growth is in fact picking up.
We remain confident that prices are close to a low and continue to have a bullish bias for the metal.
Chart Point – Copper
Technically, we have broken through major support however the market has bounced back through the trend line. This does present a bullish picture for the commodity. Momentum indicators are also pointing higher so we can suggest a low of importance has been found and a break through US360 should confirm this. If you are going long then stops need to be placed below US 340. We continue to hold onto our targets of US380 and US400.