Copper (LME) Long Term Technical View

Insignia Consultants

                                                                                   New Delhi

Thursday, March 26, 2020

TIME 1:25 PM IST                       

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COPPER (LME) TECHNICAL VIEW

I started tracking copper when it was around $1300. Copper was the first metal outside gold and silver which I analyzed. Later I moved to all major industrial metals. From $1300 to $10,000 and followed by a few near boom bust scenario between 2003 and 2020.

Demand

There will be more usage of copper in daily appliances and industries if copper prices remain subdued once the world opens. Key is gap between copper and aluminum.

The narrower the gap (between copper and aluminum), the higher will be the industrial demand for copper.

The wider the gap (between copper and aluminum) the incremental demand for copper will be less, unless global economic growth is high.

Aluminum wire is used more than copper is most industries, low cost consumer durables. If copper prices remain soft and aluminum price do not fall, then more and more industries will use copper wires than aluminum. This is just a one off example. I can unlimited examples where aluminum has replaced copper.

Supply

There are adequate supplies of copper every nation worldwide to last a few months. I spoke to my cousin who is a recycler of copper. His view that there is adequate copper scrap stocks to last a few months in India. Copper scrap is a big market.

Copper and infact every metal mine is closed or is on the verge of being closed. Corona virus and fall in price is the key reason. Most of the copper mines are not expected to start before end of May. In my view if mines are closed June or beyond and nations start functioning normally, then there will be a supply deficit.

Worldwide industrial demand has now taken a hit on global lockdown. The sunshine factor is that Chinese factories are operating around eighty percent of normal utilization. Chinese factories should see double or triple shifts by end April. Chinese demand alone will ensure that copper prices are in a long term bullish trajectory.

WHAT TECHNICAL SAY – Current price $4788.20

  1. 200 month moving average around $3707 is the key long term support.
  2. Immediate resistance is at $5481.
  3. View for April: Copper needs to trade over $4177-$4290 zone to rise to $5481 and $6106.
  4. View till end December: Copper can rise to $6690 and $7726 as long as it trades over $3490-$3707 zone.

Final Verdict.

The current fall in prices is nothing but a great long term investment opportunity. By long term I imply eighteen months and more. However I will be closely watching the day to day developments of global economy till end June. Short term neutral in copper.

If copper trades below $3707 anytime this year or next year, it will imply a long term recession. There will be a total breakdown in global economy or mass unrest situation or the corona virus is out of control with world being converted into a graveyard. Let’s hope that copper prices do not fall below $3400-$3700 zone.

Last look for producer price de-hedging by miners. It impacts greatly when prices fall.

Disclaimer: Any opinions as to the commentary, market information, and future direction of prices of specific currencies, metals and commodities reflect the views of the individual analyst, In no event shall Insignia Consultants or its employees  have any liability for any losses incurred in connection with any decision made, action or inaction taken by any party in reliance upon the information provided in this material; or in any delays, inaccuracies, errors in, or omissions of Information. Nothing in this article is, or should be construed as, investment advice. All analyses used herein are subjective opinions of the author and should not be considered as specific investment advice. Investors/Traders must consider all relevant risk factors including their own personal financial situation before trading. Websitewww.insigniaconsultants.in. Prepared by Chintan Karnani

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