Weak Manufacturing Readings Hurt Copper Sentiment

Copper prices remain under heavy selling pressure through the middle of the weak with the futures market now down more than 5% from the week’s highs.  The move comes amidst heightened concerns around global industrial activity after data this week showed weak manufacturing PMIs in both China and the US. In the US, the factory sector was seen slipping deeper into negative territory last month with construction spending also falling into negative levels. While US recession fears had receded over recent weeks, the data shows that there are still issues to be monitored, with copper prices falling accordingly.

Chinese Copper Demand Outlook Reduced

Copper bulls received further bad news this week with Aussie mining titans BHP downgrading its Chinese copper demand outlook for 2024. BHP cited concerns over the country’s economic recovery given a slew of weak data over recent months. This week, the Chinese manufacturing PMI was seen barely holding in positive territory at 50.4. An absence of full fiscal support for the Chinese economy has been one of the standout themes this year. Despite growing concerns over the health of the Chinese economy, a broad package of measures has yet to be announced. While this remains the case, it seems unlikely that copper demand expectations are likely to improve near-term though a weaker US Dollar through year end, driven by Fed easing should provide some support.

Technical Views

Copper

The breakout in copper above the bear channel has stalled for now into the 4.3000 level with price since reversing sharply lower. Price is now resting the broken channel highs, with the 3.9350 level as support also. While above here, focus is on a fresh turn higher. Below, 3.6720 will be key support to watch.