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Copper trends have divorced from China, may fall to $7800/tonne

Friday, 17 February 2012 | 12:51
Copper prices were influenced by Chinese demand and many investors used to look at Chinese import figures and domestic demand to predict future trends in copper. But recent data suggest that copper trends may have finally divorced from Chinese demand, a Citigroup report states.
Copper prices have rallied since the beginning of 2012 and the trend seems to be largely unrelated to Chinese demand. Copper inventories in China is rising, premiums for the physical metal is softening and traders have been absent from the market since December. In spite of such negative Chinese indications, prices have risen since January this year.
“For any price rally to be sustainable, there needs to be some form of fundamental support, whether in the form of tightening supply or surging demand. Given that neither is apparent, the rally seems likely to falter, with the key question being the timing of any fall back”, The Citigroup report states
Chinese traders were buying at $6600- $7500/tonne levels for most of the last half of 2011, indicating that they are getting more price sensitive. The report suggests $8150/tonne as a crucial support level, the breach of which could expose prices to $7800/tonne.
Source: Commodity Online
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