Copper, a metal used in power and construction, surged to highest peak of the month on expected growth in China coupled with improving demand signs on falling inventories.
Copper inventories tracked by the London Metal Exchange, a demand barometer, have been shrinking for the past 25 days - the lengthiest drawdown run since a 40-session streak that ended on July 2, 2009.
Stockpiles have fallen to 416,525 tons from 549,725 tons, the lowest level since Nov. 18. They are down 17% this year and headed for the first annual drop since 2004. With stocks having dropped about 24% from levels in mid-February firm demand is suggested.
Bookings to remove copper from LME warehouses have gained 15%, the most since June 14, to 38,550 tons, the highest level since June 2, 2009.
On the fundamental side, consumption of copper is growing on improving demand from emerging economies, according to the International Copper Study Group. World refined copper consumption exceeded production by 67,000 tonnes between January and April this year, against a surplus of 74,000 tonnes in the same period one year ago.
Copper is also gaining strength on technical charts. It has formed an "Inverse Head & Shoulder" pattern on LME copper charts. Neckline breakout of this chart was placed at $6,800 and that has broken with a target of around $7800 (i.e. 15% upside) within a three months time horizon. On Multi Commodity Exchange of India Ltd. prices are expected to rise near `360/kg from trading currently near `325/kg.
Renisha Chainani is a deputy manager for research at Anagram Capital Ltd. in Ahmedabad, Gujarat, India,and blogs at marketsandyou.blogspot.com.
