Copper prices declined by -0.31%, settling at 727.6, influenced by a strengthening dollar and concerns about demand in China, exacerbated by weak industrial sector data. China's manufacturing activity contracted for the third consecutive month in December, falling to 49.0 from the previous month's 49.4, raising uncertainties about the country's economic recovery. Worries about potential surpluses in the copper market were evident in the discount for cash over the three-month contract, trading at $104 per ton, near the 31-year lows seen in November.
China's reduced appetite for metal purchases, following a seasonally strong period for production to meet year-end targets, contributed to this trend. The Yangshan copper premium, reflecting import demand, fell to $67.50 per ton, down 67% from a month earlier. The rebounding US dollar, as traders assessed the extent of the Federal Reserve's loosening in the coming year, contributed to the pressure on copper prices. The dollar's rise impacted the purchasing power of importers, leading to lower prices for commodities priced in the currency. Despite some uncertainties, copper prices saw a slight increase last year, with market participants building long positions amid warnings of a potential supply shortage in the long term. This anticipation is driven by the crucial role copper plays in the global electrification movement.
Technically, the copper market is undergoing fresh selling, with a gain in open interest by 0.35% to settle at 5193. The current support for copper is at 724.9, with a potential test of 722.1 levels, while resistance is likely at 730.1.