Forecasts and market analysis based on price assessments from Fastmarkets MB and Fastmarkets AMM

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February 2020 | Base Metals

Copper: More room for short-covering

Copper has experienced a small bout of short-covering over the past week, after January’s sell-off. Refined market conditions have clearly deteriorated since the start of the year, especially in China due to the coronavirus outbreak. However, we expect the rebound in copper prices could extend further into the end of Q1 if macro fears continue to ease and amid loosening financial conditions across the globe. Our near-term bullish view is macro- and tactically-driven.

Copper prices supported by short-covering
The LME copper price gained nearly 2% last week, primarily driven by short-covering judging by the fall in open interest and tighter nearby spreads. Chinese financial markets showed signs of stabilization, driven by abating macro fears over the impact of the coronavirus, the emergence of virus-related supply disruptions, encouraging economic data, and easing financial conditions from the PBOC. As a result, Chinese investors unwound LME short positions built during the Lunar New Year holidays. That said, refined market conditions continued to soften, as evident in rising domestic inventories, looser spreads at the long-end of the LME curve, and static premiums.

Chinese premiums: Static so...


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