Copper: Strikes End But Flood Damage Keeps Price Supported
Copper prices rebounded this week following a decline last week on easing supply concerns. The resolution of strikes at Freeport’s Grasberg mine in Indonesia and BHP Billiton’s Escondida mine in Chile fuelled a sell off last week as expectations of increased supply weighed on the price.
The rally comes despite a rebound in USD which managed to reverse gains this week. The latest wave of buying comes on the back of renewed expectations of Chinese demand following a report from a Chinese government think tank which suggests that the Chinese economy will grow 6.8% year on year over Q1 2017 fuelled by an uptick in production activities and investment.
While supply risks from mining strikes have receded over the past week, the impact of flooding and consequent infrastructure damage on metals shipments from Peru has caused fresh concerns. However, high levels of refined stocks alongside a surge in the secondary material have kept upside limited. However, the threat of further disruptions points to upside risks for price Indeed, In a report released this week, Goldman Sachs gave a bullish forecast for copper over 2017 which they say will come as a result of a shortage in supply as China booms again.
The consolidation continues in copper highlighting a cautious market looking for directional catalysts. Fading optimism around Trump’s proposed infrastructure spending has capped upside momentum for now, but persistent supply disruptions have kept Copper supported. The key upside level remains a test of the bearish trend line, and 2015 high while to the downside main support comes in at a retest of the base-breakout level around mid-2016 highs.
Iron Ore: Vulnerable Fundamentals Pose Risks to Upside
The recent rally in Iron has now stalled though fundamentals such as steel mill profitability and domestic steel prices continue to be supportive. However, conditions appear increasingly vulnerable, and steel mill profitability will be closely watched as a key indicator for a reversal in Iron prices.
Outside of the steel market, iron ore inventories have surged to record highs. However, this isn’t immediately bearish for the market given China’s present preference for higher-grade ores. If Steel demand weakens and steel mill profitability drops, China will shift to lower-quality ores which are widely available globally, lowering prices.
Iron prices continue to stall near highs. The key support level that will be watched is the 77 – 75 region where price found key resistance at the end of 2016.
Platinum: Clean Air Initiative To Boost price
Platinum prices slipped lower this week, weighed on by the rebound in the US Dollar. The latest import data for China showed that while imports rose 30% YoY, they fell 9% MoM to their weakest level since July 2016. This is important as despite a greater number of trading days in 2017 they are above last year’s average monthly imports and also the five-year average.
The outlook for platinum prices is bullish as demand increases are forecast, linked to an effort by mayor’s of the world’s biggest cities to tackle air pollution. Platinum is used to catalyse vehicle exhaust systems and reduce emissions and is expected to be in utilised in greater quantity as part of the C40 Cities Climate Leadership Group initiative.
The broader contracting triangle pattern remains intact. For now, platinum prices continue to consolidate at the foot of the latest decline and are sitting just above trend line support from last year’s lows which bulls will be looking to use as a platform for a rotation higher toward trend line resistance.