HG copper broke higher following several months where supply worries helped offset the headline risks associated with the US-China trade war and weaker economic data. Glencore, at the presentation of their quarterly result, joined other miners in flagging supply concerns from India, Peru and Africa. Adding to this, we have support from China where a stable to stronger yuan and looser credit conditions have boosted sentiment.
The focus on tightening supply has also helped copper buyers draw some inspiration from palladium, which despite slowing car sales has surged. This week it reached a record $1,500/oz due to the prospect of strong demand due to stricter emissions standards outstripping supply over the coming year. The upheaval seen in platinum group metals following the diesel scandal in 2014 has seen palladium move from a discount of $700/oz to a record $650/oz premium over platinum.
Staying with copper the latest (but still delayed) Commitments of Traders report from the US CFTC covering the week to January 29 showed a managed money short of 40,300 lots, not far from the June 2016 record of 47,100 lots. A 6% rally since then is likely to have attracted a significant amount of short-covering. Whether a long position has been established ahead of the price breakout this past week, however, remains to be seen. The CFTC will not be up to date before March 8 when data covering the week to March 5 will be published. Following months of rangebound trading, high grade copper has broken above $2.84/lb to target the next level of resistance at $3.02/lb: