After a strong start to the week, printing further fresh 2017 highs, copper fell back over the latter part of the week as concerns around China fueled profit taking. Driving the rally over the first half of the week was a report from the top global copper producer, Codelco, noting that its H1 production fell 5.3% against H1 production in 2017. The produced blamed falling grades for the decline.
However, despite the lower output the company still registered a $1 billion profit over the period thanks to the surge in copper prices. The chairman of Codelco, Oscar Landerretched, recently voiced his concerns over the rally in copper saying “I’m a little skeptical..in the short term… It’s true that all of the fundamentals are good in the medium- and long-term…but I would be very cautious.”
However, the declines in copper were capped as the US Dollar suffered further downside this week linked to receding 2017 rate hike expectations. A weaker US Dollar makes dollar denominated assets cheaper and has helped buffer profit taking in the red metal.
The rally in copper this week saw price printing fresh three-year highs before reversing to end the week negative. For now, price remains between support at the broken 2015 high around 2.962 and resistance at the mid- 2014 high around 3.272 which is also the 50% retracement from the 2010 highs.
Iron ore: Sell Off Continues on Weak Steel Prices
Iron, which has put in an impressive rally over the last few months, tumbled to a three-week low this week as weakness in the Chinese steel market weighed on the price. As steel stockpiles in China have lifted, steel prices have come under pressure with inventories last week marking their largest gain since February. Reports also indicate that another round of environmental inspections by the Chinese Ministry of Environmental Protection focused on factories and construction sites might have added to the sell-off.
