Copper prices continued to benefit from domestic favourable conditions

In the Chinese market, the MLF interest rate remained unchanged, and the LPR continued to be "on hold" in December. However, the market still maintained expectations for subsequent RRR cuts and interest rate cuts, which will activate consumer credit demand. On the evening of December 21, ICBC announced that it would lower the deposit interest rate starting from December 22, 2023. This is the third time that the bank has lowered the deposit interest rate in 2023; market liquidity will continue to increase in the near future, which is also a good signal for market economic activities.
Copper prices continued to benefit from macroeconomy and remained high during the week. The impact of high copper prices and high premiums, as well as the offseason weakened downstream orders. The operating rates at copper rod plants rebounded in the week ending December 22, mainly due to normal shipments at the end of the year. Domestic inventories were still at a historical low, but there were expectations for supply increases in near term. The backwardation structure of SHFE front month contract over the next-month contract narrowed and was expected to turn into a contango structure. The drop in LME copper inventories was mainly driven by Asian warehouses. Europe and American warehouses maintained destocking. The conganto of LME0-3 is expected to narrow.