Rising rate hike expectations put copper market under pressure, drifting lower [SMM Copper Morning Comment]

SMM Oct 15: Overnight, LME copper closed down 0.82%, driven by bearish positioning; SHFE copper closed down 0.81%, driven by bullish liquidation. On the macro front, US September CPI and core CPI both beat expectations, fueling expectations for US Fed interest rate hikes. Combined with high oil prices lifting enterprises' expectations for price hikes and ongoing geopolitical disruptions in the Middle East, multiple factors weighed on copper prices. Copper prices are expected to consolidate on a subdued note within a narrow range today.

1. Overnight session LME copper: Opened at $14,611.5/mt, hit a high of $14,700/mt, a low of $14,425/mt, and closed at $14,436/mt, down 0.82%. Trading volume was 21,000 lots, with open interest at 265,000 lots, up 816 lots from the previous trading day, reflecting bearish positioning. The most-traded SHFE copper 2611 contract: Opened at 110,780 yuan/mt, hit a high of 110,800 yuan/mt, a low of 109,900 yuan/mt, and closed at 110,110 yuan/mt, down 0.81%. Trading volume was 41,400 lots, with open interest at 195,000 lots, down 2,076 lots from the previous trading day, reflecting bullish liquidation.

2. Macro front US September CPI rose 3.7% YoY, and core CPI posted its largest MoM gain in five months, with both figures beating market expectations and fueling expectations for a US Fed rate hike in October. US Fed officials were divided in their remarks, with some saying inflation had underperformed expectations but more economic data was needed before making a judgment, while others did not rule out further rate hikes. The latest Beige Book showed that high oil prices have been passed through to multiple districts across the US, lifting enterprises' expectations for price hikes. Combined with ongoing geopolitical disruptions in the Middle East, stronger inflation and rising oil prices jointly weighed on copper prices.

3. Fundamentals Supply side: Limited arrivals of domestic cargo kept overall supply tight. Demand side: Downstream purchases were mainly need-based, with demand remaining weak. The market showed a supply-demand both weak pattern.