The month of May for copper should end with a fall around 10%, which is the second biggest monthly decline, since November 2008. The metal continues to be in backwardation condition even if the discount with 3 month-delivery contract is reduced from end April peak, where the spread reached $150. The discount on the futures contracts has given a good opportunity to sell the copper on the spot market. For this reason, during last month, we attended to a strong reduction of Chinese stockpiles. In fact, copper inventories monitored by the Shanghai Futures Exchanges fell 9.4% last week, slumping for a seventh week after has reached record levels. While copper inventories tracked by the London Metal Exchange rose 1.2% to 225,800 metric tons, the highest level since May 8.
Besides US hedge funds have short positions above 30,000 tonnes, according to last report of Commodity Futures Trading Commission. On the other hand these low prices could push Chinese investors to give new power to coppers demand.
Technically, the volatility remains in the one year average, even if is on high levels of May.
In daily data, the short-term support of USD 7630 seems to have stopped the bearish trend. During the last month the sell pressure has won the day and for this reason we are not confident yet for a recovery. Only the overpassing of the USD 7850, could give a new strength to set up an upward trend. In this case, we suggest to open a long position in order to aim a return in the area of USD 8500 (2012 highs).