Copper Prices could not Stop Falling under the Pressure of the Potential Global Economic Recession

SHANGHAI, Jun 27 (SMM) - Last week, non-ferrous metals prices were suppressed by the shorts. Overseas, at the hearing, Fed Chairman Powell admitted the misjudgement of inflation in 2021, and once again said that the Fed would raise interest rates quickly to cope with the dilemma and that the economic recession was not inevitable. In addition, the economic data of Europe and the US weakened, and the risk of US economic recession intensified, which further reduced the attractiveness of US treasury bonds to global investors. The yield of US treasury bonds further shrunk, reflecting the possibility of economic contraction. In China, the National Standing Committee again highlighted the full power of policies to stabilise the economy, which, however, should be subject to the reality.

On the fundamentals, copper concentrate TCs were slightly dropped, but TCs of $75/mt under the long-term orders set by Japanese smelters and Antofagasta in mid-year show that the long-term concentrate supply is not pessimistic. Smelters in China may also settle the TCs at $74-79/mt. On the demand side, copper scrap prices became higher due to the sharp drop in copper cathode prices, further pushing up the weekly operating rate of copper cathode rod producers. The falling prices also boosted the terminal restocking, and the wire and cable companies preferred the copper cathode rod. The reduction of production in air-conditioning enterprises led to slack demand for copper tube, and the operating rates of copper tube producers declined. Industries such as new energy and electronic transformers recovered, increasing the demand for copper plate, sheet and strip, and foil. On the whole, the price decline has stimulated the downstream consumption to a certain extent, which needs to be further verified by the market. Fundamentals cannot offer support as the trading in the market is dragged down by the pessimistic macro front.

Overall, the overseas prices have been on a downward trend for 12 consecutive trading days, with a decline of more than $1,000/mt. LME copper prices have fallen below the support of all technical indicators. The most-traded SHFE 2208 copper contract is expected to trade between 61,000- 64,500 yuan/mt, and LME copper will trade between $8,000-8,450/mt.

In the spot market, last week, the SHFE/LME price ratio rose, stimulating the trading of imported copper. As a result, the inflow of imported copper increased, and the deliverable goods flowed into the market. The sufficient supply and the weak demand before the end of June were not favourable for the spot premiums. Premiums are expected to move between 0-100 yuan/mt this week.