Copper prices plummeted as China economic data disappointed market

Last week, a barrage of Chinese economic data, including the industrial added value, total retail sales of social commodities, fixed asset investment, real estate investment and commercial housing sales as well as unemployment rate issued by the National Bureau of Statistics, disappointed the market. This came after the Purchasing Managers' Index (PMI), Consumer Price Index (CPI), Producer Price Index (PPI) as well as commodity import and export data indicated that China's domestic demand is still weak with excess supply, and economic recovery is slow. The market's confidence in China's economic development has thus been depressed, weighing on the Chinese yuan.

The People's Bank of China lowered the reverse repurchase, medium-term and standing lending rates but that failed to bolster the weakening market confidence in China's economic development. US retail sales in July rose 0.7%, exceeding the expected 0.4% growth, and marking the largest increase since January 2023. The US index rose rapidly after the data was released. The "horror data" show that the US economy is still in expansion. And market expectations for a soft landing of the US economy grew. As such, the US dollar index will remain strong in the short term. The moderate GDP growth in the eurozone in the second quarter was in line with market expectations. On fundamentals, the pick-up in orders raised operating rates at copper rod plants using copper cathode as raw material last week.

In aggregate, copper prices will lack the impetus to rise. Consumption will remain resilient. Aggressive downstream purchases amid lower copper prices, together with the low social inventory, will underpin copper prices. The most active SHFE copper contract prices are expected to move between 67,000-68,500/mt this week, and LME copper will trade between $8,100-8,450/mt. Spot premiums in Shanghai are expected to fall to 300-550 yuan/mt this week.