Copper Price Forecast: Evergrande Contagion Infects Charts

All About Evergrande

In the late-August copper price forecast update it was noted that “the shifting narrative around the supply-demand picture has created an opportunity whereby copper traders may be able to retake the pandemic uptrend, which would keep intact the prospect of a multi-month bull flag forming – and if viable, another jaunt to all-time highs.”

Copper prices were never able to retake the pandemic uptrend. Instead, besieged by news out of China that its second largest property developer, Evergrande, was facing the threat of default, markets have pushed copper back towards its August low.

The simple truth of the matter is that near-term speculation around China and the future of property development in the world’s second largest economy – and the largest consumer of copper – is trumping any other sort of good news that would normally bolster copper prices.

In fact, just yesterday, the International Copper Study Group’s (ICSG) latest bulletin showed that the copper market showed a 90,000 tons deficit in June, compared with a 4,000 tons surplus in May. Per the bulletin, through the first half of 2021, the market was in a 2,000 tons deficit compared with a 67,000 tons surplus in the same period a year earlier.

Until news around China’s Evergrande and the broader Chinese property development sector is on a path towards resolution that doesn’t provoke fear of economic and financial contagion, copper prices may be in volatile, difficult trading over the coming weeks.

Copper Price Technical Analysis: Daily Chart (March 2020 To September 2021) (Chart 1)

(Click on image to enlarge)

Last month it was noted that “the line in the sand is clear for copper prices in the near-term: 4.2700 by the end of August. By reclaiming said figure before month’s end, copper prices would be back above their pandemic uptrend, suggesting that a false bearish breakout had transpired.” However, copper prices were unable to maintain a move back above the pandemic trendline, instead collapsing below the 23.6% Fibonacci retracement of the 2020 low/2021 high range at 4.2000.

1 2
View single page >> |
How did you like this article? Let us know so we can better customize your reading experience.


Leave a comment to automatically be entered into our contest to win a free Echo Show.