Inflation data exceeded expectations, domestic and overseas copper futures pulled back in tandem [SMM Copper Morning Comment]

SMM Oct 16 news: Overnight, LME copper closed down 0.88%, driven by increased bearish positions; SHFE copper closed down 0.71%, driven by reduced bullish positions. On the macro front, US September PPI and retail sales data came in stronger than expected. Rising inflationary pressure, combined with hawkish remarks from the US Fed, news on US-Iran tensions, and easing mine strikes, dragged copper prices lower under pressure. Copper prices are expected to hold up well in a narrow range today.

1. Overnight session LME copper: Opened at $14,317.5/mt, hit a high of $14,382/mt, a low of $14,256/mt, and closed at $14,309/mt, down 0.88%. Trading volume was 30,800 lots, with open interest at 270,200 lots, up 5,126 lots from the previous trading day, driven by increased bearish positions. The most-traded SHFE copper 2611 contract: Opened at 108,850 yuan/mt, hit a high of 109,190 yuan/mt, a low of 108,600 yuan/mt, and closed at 108,970 yuan/mt, down 0.71%. Trading volume was 37,500 lots, with open interest at 185,000 lots, down 3,508 lots from the previous trading day, driven by reduced bullish positions.

2. Macro front US September PPI rose 6.3% YoY and 1.3% MoM, both well above expectations, while retail sales rose 0.8% MoM, also beating expectations, signaling mounting inflationary pressure. US Fed's Hammack said worsening inflation expectations could force the Fed to take more aggressive action. Meanwhile, according to US media reports, the US has drawn up new strike plans against Iran, potentially using the "Mother of All Bombs" for the first time to target Iranian energy and nuclear facilities. Stronger-than-expected US inflation data, coupled with easing strike events, pushed copper prices lower under pressure.

3. Fundamentals Supply side: Warrant registrations increased ahead of delivery, and unmatched warrants are expected to flow out after delivery, but low-priced available cargoes in the market remain relatively limited. Demand side: Downstream purchases improved slightly after copper prices pulled back, but overall volumes did not increase significantly, with transactions still dominated by rigid demand, reflecting weak demand performance. Inventory: Data summary: As of Thursday, Oct 15, SMM nationwide mainstream copper inventories across major regions rose 12,100 mt WoW to around 110,000 mt, with total inventories down more than 60,000 mt from above 170,000 mt in the same period last year.