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Yesterday’s trading activity hints towards copper’s ability to break back into the range-bound trading it held for most of the August to November period, when it oscillated either side of the $3.30 level.
The fundamentals of the copper market are well set; most of the larger copper miners anticipate improved productivity and increased supply to the market, but even with solid improvements in the manufacturing figures coming from Asia and China specifically, current market expectations are that they will not absorb the extra supply.
My colleague Peter Martin has observed that the pace of expansion in US manufacturing is accelerating, and that the ISM manufacturing index has hit its highest level in two-and-a-half years, and believes that this pick-up in the market will see a larger demand; however, in the global supply of copper, US demand is unlikely to cover the excess supply either. Of course there is nothing to stop the miners from slowing the supply chain down by withholding some of the metal, but that possibility will probably not be able to be explored until later in 2014.
Copper’s ability to break above $3.25 or below $3.18, which defined yesterday’s trading range, could give a considerably clearer picture regarding the short-term direction of the metal.