After the metal charged into oversold territory, it is perhaps no real surprise that this was followed by a couple of days of short covering. Although there is a scarcity of good news available for copper, the predominantly one-directional trajectory was bound to ease at some point.
Today we have again seen some mild buying support helping to edge the spot price of high-grade copper higher. And, when you consider it has just come off the longest losing streak in almost four decades, we should not be surprised if we see a couple of days of bounce.
It has been widely anticipated that an increase in mining capacity would see the market flooded with copper. However, a number of the larger smelting plants around the globe have, for one reason or another, been unable to run at full capacity. This has created something of a bottleneck: miners are able to extract the commodity from the ground, but smelters are unable to convert it into saleable high-grade copper at the usual rate. This could take a little time to unwind, but ultimately will create a ready supply to the market.
Copper’s bounce could last a little longer, but ultimately the spot price looks destined to head lower.