Copper trading outlook: futures reach a three-month peak as China, Japan support; Norilsk reveal copper mine plans

Copper futures reached a three-month high during early trading in Europe today, as China demand outlooks grew when the government expressed commitment to economic reforms. Japan posted a sizable growth in machinery orders earlier today, further supporting the metal. Elsewhere, Norilsk Nickel approved a $1 billion copper mine investment, aimed at supplying demand in China. Factory indicators to be reported later this week.

Copper futures for settlement in July added 0.75% to trade at $3.1705 per pound at 11:09 GMT today on the COMEX in New York. Prices shifted in a daily range between $3.1405 and $3.1840 a pound, reaching the highest level in almost three months. The contract added 2.09% last week as physical demand in top-consumer China, in addition to positive data from the US boosted the red metal.

The Chinese government revealed plans to accelerate the economic reform, which is aimed at improving growth in the worlds second-top economy. China consumes more than 40% of the world supply of copper, and the news impacted the red metal, boosting contract prices.

Earlier data from China revealed industrial output, as well as retail sales and investments were slightly slowing. However, peaking construction activities, in addition to government stockpiling of the metal supported copper and made possible an 8% gain since mid March.

“Its been an impressive rally from the March lows with a very strong seasonal backdrop to copper … total inventories are also declining very quickly at the moment,” said for Reuters Mark Keenan, analyst at Societe Generale in Singapore.

Also stemming positive sentiment for the metal, Japans core machinery orders, which exclude ships and utilities, for March grew by 19.1% since February, when an 4.6% contraction was recorded. On an yearly basis orders increased by 16.1%.

Previously, improving US housing data pared a slowdown in industrial output in the worlds largest economy. A report on Friday revealed building permits in the US increased 8.0% on a monthly basis in April to mark the highest figure since July 2008, while housing starts grew by 13.2% and settle at a six-month peak.

This week will reveal manufacturing PMI figures for China, the EU and US, with expectations of slightly lesser contraction in China and steady growth in the EU and US.

Elsewhere, Russias Norilsk Nickel, which is ranked among the top 10 copper producers worldwide, revealed plans to invest about $1 billion in a rich copper mine. The produce is aimed at supplying the dominant China market. The mine will be able to produce 10 million metric tons of ore a year. The project will have its go-ahead, as the company reached a preliminary deal with “a key Russian development institution on funding the project,” First Deputy Chief Executive Officer Pavel Fedorov said for Bloomberg.

Technical view

According to Binary Tribune’s daily analysis, in case Copper July futures manage to breach the first resistance level at $3.1618 per pound on Monday, they will probably continue up to test $3.1767. In case the second key resistance is broken, the industrial metal will likely attempt to advance to $3.1938.

If the contract manages to breach the first key support at $3.1298, it may continue to slide and test $3.1127. With this second key support broken, the movement to the downside will probably continue to $3.0978.