SHANGHAI, Oct 18 (SMM) - The US announced on the evening of October 13 the CPI for September, which rose 8.2% year-on-year, exceeding market expectations. The core inflation rose by 6.6% year-on-year, the largest increase in 40 years. After the data was released, the US dollar soared to 113.91. The remarkable rise in core inflation suggested that the US Fed’s five rate hikes in 2022 cast little impact on the high inflation. Besides, the manufacturing and service PMI of the eurozone recorded 48.4 and 48.8 respectively in September, which hovered below the 50-point mark for three consecutive months, and the European economy was also in the shadow of a possible recession. In China, the non-manufacturing and Caixin PMI both fell month-on-month in September, of which Caixin PMI dropped below the 50-point mark again, but social financing data in September still supported the infrastructure industry. The growth of M2 money supply, social financing, and new loan in September all exceeded expectations, which was caused by the increased demand for financing for infrastructure projects in the peak season of the construction industry. However, household consumption and real estate consumption remained weak. Attention should be paid to the relevant policies to be introduced by the 20th CPC National Congress.
On the fundamentals, LME copper inventories continued to increase in September, with the LME inventory reaching 140,000 mt, and the premiums of LME cash to 3M contract dropped to around $59/mt in the backwardation structure. But recently, with the rising proportion of LME cancelled copper warrants, the premiums once again surged to more than $90/mt. On September 26, CSPT nailed the TCs of spot copper concentrate in the fourth quarter at $93/mt, $13/mt higher than that of the third quarter, suggesting an abundant supply of spot copper concentrates. In such a context, many domestic smelters are active in production, and the total copper cathode output growth will continue apace in October. In addition, since early October, the import window of copper has opened, and imported copper is expected to flow into the domestic market one after another starting from late October. On the demand side, after the National Day holiday, orders placed relating to infrastructure facilities by the State Grid accelerated, and the comprehensive unit price of orders increased slightly. The copper consumption of wire and cable enterprises that produced the State Grid's orders was on an upward trend on a month-on-month basis, which showed a seasonal feature, but the growth of orders placed by the State Grid may not last until November 2022. In addition, the real estate-related supporting policies are gradually taking effect, but it will take some time for the demand to be transmitted to the copper industry chain. It is expected that the supply and demand will be in a weak balance in October, and the market will still bear the possibility of a short squeeze amid the low inventory.
The most-traded SHFE copper contract is expected to move between 59,000-65,000 yuan/mt in October and LME copper will trade between $7,400-7,750/mt.
