SMM copper morning comment: Growing risk aversion lowered copper prices

LME copper prices opened at $8384.5/mt and closed at $8295/mt last Friday evening, a drop of 0.96%, with the low-end of $8292.5/mt and the high-end of $8413.5/mt. Trading volume was 23,000 lots, and open interest stood at 277,000 lots. The most active SHFE 2403 copper contract prices opened at 68000 yuan/mt and closed at 67850 yuan/mt last Friday evening, down 0.32%, with the high-end of 68140 yuan/mt and the low-end of 67800 yuan/mt. Trading volumes stood at 22,000 lots and open interest stood at 141,000 lots. On the macro front, after the US and UK attacks on Yemen, the market's risk aversion was strong, which to a certain extent stimulated the US dollar index to rise, suppressing copper prices. On fundamentals, as of Monday January 12, SMM copper inventory across major Chinese markets decreased 900 mt from last Monday to 72,000 mt, down 63,500 mt YoY. In the East China market, a decline in arrivals, some supplies going to the south and strong demand resulted in a decrease in inventory; the high premiums in South China attracted supply from other regions, and shipments from local warehouses decreased, increasing inventories in South China. The arrival of imported copper has decreased from the previous week, and the enthusiasm of refineries to ship goods will decrease after the delivery. The supply is expected to decrease from last week. In terms of consumption, processing companies are currently preparing for the CNY holiday. When copper prices are relatively low, demand is expected to increase significantly, and consumption is expected to be better than last week. In terms of price, strong macro risk aversion and gradual weakening of consumption at the end of the year have put greater pressure on copper prices.