Copper prices surged by 2.08% to settle at 801.45, driven by concerns over potential supply disruptions as a strike at BHP’s Escondida copper mine in Chile, which accounts for more than 5% of global copper supply, threatened to create a significant deficit in the market. Other copper mines in Chile also face unresolved wage negotiations, adding to the supply concerns and keeping the market on edge. On the demand side, better-than-expected U.S. economic data alleviated fears of an imminent recession, supporting copper prices. Market participants are still betting that the Federal Reserve will begin cutting interest rates in September, as inflation pressures ease.
However, signs of weak demand from China, the world’s largest copper consumer, continued to weigh on sentiment. China's industrial production grew less than anticipated in July, and the latest manufacturing PMI reports indicated deteriorating operating conditions, further clouding the demand outlook. Copper inventories monitored by the Shanghai Futures Exchange fell by 8.4% from last Friday, reflecting tighter supply. Meanwhile, China's refined copper production in July increased by 7% year-over-year, reaching 1.1 million metric tons, according to the National Bureau of Statistics. Despite the higher production, China's unwrought copper imports decreased by 2.9% in July compared to the previous year, underscoring subdued demand.
Technically, the copper market is experiencing short covering, with open interest dropping by 13.13% to 11,364. Copper prices are currently supported at 795.7, with a potential decline testing 789.7 levels if this support is breached. On the upside, resistance is expected at 805.3, and a move above this level could see prices testing 808.9.