Industrial metals have been facing downside momentum despite hopes of new Chinese stimulus. According to TDS commodity strategists, the gauge of commodity demand is weakening in a challenging global macro environment. Copper, in particular, has remained flat while other metals are expected to slide lower.
Traders on the Shanghai Futures Exchange have been liquidating their copper positions, indicating a lack of belief in the stimulus talk. Additionally, base metal specific ETFs have seen declines in assets under management, and money manager positioning for copper is also decreasing from previous highs. There may be further downside in the short term as overextended positions continue to unwind.
Commodity Trading Advisors (CTAs) currently have a safe margin before the next selling trigger for copper at $9,104 per ton. Aluminum prices are also under pressure, with CTA selling triggers set at $2,400 per ton. Zinc and lead are also at risk of selling according to analysts.
The global macroeconomic landscape continues to pose challenges for industrial metals, with sentiments of new Chinese stimulus not being fully embraced by traders. The reduction in AUM for base metal ETFs and decreasing money manager positioning indicate a pessimistic outlook for metals such as copper. As bloated positions unwind, there could be further downside in the near term for these metals.
Despite the uncertainty surrounding industrial metals, CTAs have a significant margin of safety before the next selling triggers for copper, aluminum, zinc, and lead. This suggests that while downside momentum persists, there may still be some room for stabilization or potential rebounds in the future.
In conclusion, the outlook for industrial metals remains uncertain as global macroeconomic challenges persist. Traders are cautious about the effectiveness of new Chinese stimulus, leading to reductions in copper positions and assets under management for base metal specific ETFs. While CTAs have a safe margin before the next selling triggers, the overall sentiment towards industrial metals remains bearish in the near term.
