COPPER: Consolidation Support at $4.00 & Positive China News is Bullish

With the rejection of a sub-$4.00 trade yesterday followed by an exclusively positive trade overnight the consolidation low pattern is given additional credibility as support. The copper market should also be supported today by signs of increased Chinese demand for aluminum and from news that copper cathode supplies in Shanghai declined for the first time in 2 months. Furthermore, Chinese home prices checked a 16 month decline reportedly because of expanded government stimulus efforts for the real estate sector. However, all copper news from China is not bullish with signs of declining Chinese EV sales which reduces industrial demand for copper. It should also be noted that Chinese fabrication/product production fell 8.5% in copper foil and declined by nearly 14% in lithium battery copper foil last month. While not a major supportive development LME copper warehouse stocks broke a recent pattern of inflows with a minimal 1000-ton outflow. Earlier this week LME copper stocks had back-to-back daily increases, which is the first time that has occurred this year and only the second occurrence since November. However, LME copper stocks remain near Monday's 17-year lows. Even though the markets were aware of potential copper supply disruptions in Panama from a tax battle between the government and First Quantum Minerals LTD overnight headlines revitalize that supportive theme we doubt the markets are poised to rally off that concept.