Copper trading outlook: futures extend slide to a fifth session amid China concerns

Copper futures traded lower before noon in Europe today. Data on Chinese foreign trade for May underscored the negative sentiment for the red metal, while a fraud investigation in China is still rattling markets. Key data from China is expected later this week.

Copper futures for settlement in July fell by 0.75% to trade at $3.0280 per pound at 11:57 GMT today on the COMEX in New York. Prices shifted in a daily range between $3.0185 and $3.0595 per pound, reaching a monthly low. Last week the contract lost more than 2%.

Early on Sunday, China, which consumes 40% of all copper, revealed foreign trade data. Exports beat forecasts to log a 7.0% annual growth for May. However, imports surprisingly dropped to -1.6% on an yearly basis, down from -0.8% for April, and well below expectations for a 6% growth standing. Inbound copper was down by quite a sizable margin, with ore and concentrates imports reaching the lowest level in a year, while unwrought copper dropped 16%.

“Imports were hit by a severely negative arb in March and early April, as well as bonded warehouse premiums,” Ivan Szpakowski, analyst at Citigroup Inc. in Shanghai, said in a report today, cited by Bloomberg. He predicted “weak” incoming shipments in July and August.

Furthermore, an ongoing criminal investigation in the port of Qingdao, China, has been a sizable force on copper contracts as of recently. The probe is in address to a possible lending fraud, linked with copper consignment. The inquiry has prompted a retreat for the red metal, as investors sold assets on the physical market in China, in anticipation of further crackdown on copper deals. Additionally, institutions have become more reluctant to offer financing to metals ventures, with at least one bank stopping new metal financing deals, Reuters reported.

Later this week, Chinese industrial production for May will be posted on Friday. Experts suggest a steady 8.8% growth year-on-year, after 8.7% in April. Also due on Friday, reports on fixed assets investments and retail sales for May are expected to reveal steady annual growth for both.

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.