On the macro front, copper prices failed to sustain their rebound this week and came under renewed pressure late in the week. US October CPI rose 0.4% MoM, above the expected 0.3%; core CPI rose 0.3% MoM, above the expected 0.2%. Fed Governor Waller suggested that if inflation remains persistently elevated, a 50 bp rate hike should be considered in December. As of press time, the probability of a 25 bp Fed rate hike rose to 88.5%, while the probability of a 50 bp hike stood at 11.5%. These expectations pushed the US dollar higher, compounded by a pullback in tech stocks and waning confidence in AI infrastructure-driven copper demand growth. On the US-Iran front, negotiation expectations briefly boosted risk appetite early in the week, but Trump subsequently stated that the US does not currently need a deal with Iran and instructed Vice President Vance to shift focus to domestic affairs, cooling expectations of de-escalation. As of 11:00 on November 13, LME copper settled at $13,641/mt, and the most-traded SHFE copper 2612 contract settled at 105,380 yuan/mt.
On the fundamentals front, as of November 11, LME copper inventories rose 11,200 mt from last Friday to 328,600 mt, with the increase concentrated mainly in New Orleans; COMEX inventories edged down to 806,400 short tons. SMM China copper cathode social inventory stood at approximately 60,000 mt, down slightly from last Thursday. Domestic copper arrivals were limited, while previously delayed imported copper gradually flowed in, easing tight spot supply somewhat. However, low-priced deliverable cargoes remained scarce. With SHFE copper nearing the delivery date, the November-December backwardation widened to 2,700-3,700 yuan/mt. Meanwhile, imports were significantly profitable for the Cash month and the November and December date contracts, lifting the SHFE/LME price ratio and driving CIF Yangshan registered copper B/L premiums to nearly $300/mt, a record high. At the same time, the wide price spread between futures contracts pushed up downstream procurement costs, and the pullback in copper prices did not trigger significant restocking.
Looking ahead to next week, US inflation data will remain the key variable for copper prices. US October PPI will be released Friday evening, followed by US October retail sales on November 17 and the Fed's October meeting minutes on November 19. If US PPI or retail sales beat expectations, the market will further price in the possibility of larger rate hikes; the meeting minutes will be closely watched for divisions among members on inflation risks and the conditions set for another hike when they held rates steady in October. On the US-Iran front, if shipping through the Strait of Hormuz is disrupted again and oil prices rebound, inflation pressures will be harder to ease. Domestically, the focus will be on the shift of spot quotes to the 2612 contract after the last trading day of the SHFE copper 2611 contract on the 16th. The elevated backwardation is expected to lift spot premiums after the contract rollover. Copper prices are expected to remain in the doldrums next week, but spot prices will be relatively firm. LME copper is expected to trade at $13,300-13,750/mt; SHFE copper is expected to trade at 103,800-106,000 yuan/mt.
